Tuesday, April 7, 2009

Treasury gives banks cash, CEOs a pistol with one round.

According to the Financial Times, “Tim Geithner warned on Sunday that the US government would consider ousting board members at American banks as a condition for giving the institutions “exceptional” assistance in the future.”

When a bank is undercapitalized and new lending and borrowing are encumbered by an overhang of bad, dodgy or toxic assets, the one thing you should not do is offer public financial support to rectify this situation on terms that are very painful for the key decision makers in the banks, painful that is, for those who decide on whether to accept the state’s financial aid.


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