A daunting litany of ills imperils U.S. banks, from toxic assets to rising loan defaults. After the irritating spectacle that played out in Washington yesterday, we can add a new threat: the Congressional Oversight Panel tracking TARP.
This became all too clear when the COP—as in, Bad Cop—summoned Treasury Secretary Timothy Geithner for an update on the Troubled Assets Relief Plan. Moments after the session began, the real purpose became clear: Grandstanding enemies of the banks and Big Business were there to deliver a fingerwagging lecture to Geithner, interrupting him at will and telling him how to do his job.
The onstage dressing-down began with the panel’s chairwoman, Elizabeth Warren, a Harvard law professor who for years has crusaded against banks for charging high interest rates on credit cards. Smug and clearly enjoying her Warholian 15 minutes of fame, she appeared on Comedy Central’s “The Daily Show” last week, trading yucks with host Jon Stewart, the erudite, uber-liberal Wall Street basher.
Yesterday, she opened the hearing by declaring: “People are angry because they are paying for programs ... that have no apparent benefit for their families or the economy as a whole, but that seem to leave enough cash in the system for lavish bonuses and golf outings. None of this seems fair.” Nice shot, Lizzie!
She said TARP is “an investment that eventually must profit” all Americans “and not just Wall Street.” Hmm, I thought TARP took aim at saving the financial system from collapse and freeing banks to lend, not at turning a profit for taxpayers.
Soon after came a broadside from a union big, Damon Silvers, general counsel of the AFL-CIO, which rails against lavish executive compensation. He all but accused Geithner of hailing from the world of investment banking (not true). And Silvers helpfully preached what he said were the three key steps of “successful policy approaches to bank crises”—though shouldn’t he be asking to hear Geithner’s formula, instead?
Come to think of it, why should a union honcho be on this panel anyway? I asked Silvers about this on CNBC Reports last night—take a look. He says he’s there to “represent the American people.” Sure he is.
Good ol’ Geity endured this populist stagecraft, patiently and silently, for 26 minutes and 33 seconds as all five panel members made their opening statements. When, at long last, his turn came, Elizabeth Warren prodded: “If you could hold [it] to five minutes, I’d appreciate it.”
Five minutes and 46 seconds later, she interrupted him: “Mr. Secretary, could I ask you just to wrap it up?” He pressed on, and 83 seconds later she cut him off again. “If we could wrap up, I know we have some questions too.”
She sure did, and they revealed her real anti-bank agenda. First salvo: The banks got 10 times as much TARP cash as the automakers, but they haven’t been forced to fire their CEOs or overhaul their boards or break employment contracts as the car guys have—shouldn’t they be held to “the same kind of accountability?”
Her follow-up: Big banks just posted a quarterly profit—horrors!—while “accelerating” mortgage foreclosures and raising fees on customers who haven’t paid late. Does Geithner believe that TARP banks “should be engaging in these practices?” She had hoped to get to the nifty idea of empowering bankruptcy judges to force banks to reduce the principal owed by defaulting homeowners, but she ran out of time. Oh darn it.
Is this really the way we want our Treasury Secretary treated as he struggles to heal a critically wounded financial system? Is this really the right attitude toward the banks themselves?
No wonder J.P. Morgan Chase is steering clear of Treasury’s new PPIP toxic-assets plan, even though JPM could reap huge gains with the feds providing over 90 percent of the funding. And no wonder the TALF—the new program aimed at freeing up lending for cars, credit cards and student loans—has drawn only $5 billion in business thus far, though it had targeted $100 billion in seed money that could be leveraged up to $1 trillion.
Okay, I get it: The banks messed it up hugely, their risk management was an oxymoron, we’re mad as hell and we want to punish them. We demand our pound of flesh. The troubling thing is that so few people, in Washington or on Main Street, realize that this pound of flesh is coming out of our own hides.
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