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Feds scrutinize big banks' management
A maintenance person cleans up in front of a Bank of America branch in Chicago, Illinois.
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TEXT OF STORY
Tess Vigeland: Meanwhile you may remember that nine of the 19 banks put through the government's stress tests didn't quite pass them and were told to raise more cash. Today was the deadline for federal regulators to approve the banks' capital-raising plans. And later this week they'll tell which banks are healthy enough to exit the Troubled Asset Relief Program. But as Marketplace's Steve Henn tells us, top brass at the banks are also getting a second look from the feds.
STEVE HENN: Already the Feds have forced some shakeups. Last week -- after a bit of prodding -- Bank of America added four new members to its board, including two former banking regulators. But Paul Hodgson isn't satisfied. He tracks big companies' boards of directors at the Corporate Library.
PAUL Hodgson: We have some issues with the Bank of America board, because it's made of a number of what we call flagged directors. Directors who have had problems at companies where they were on the board, or are still on the board.
And Hodgson says even after recent changes at Citigroup, he still worries the board maybe a bit too sympathetic to executives there. Citi has been tweaking its board and management for months but...
Hodgson: There are a great many former and current CEOs on Citigroup's board. It's almost entirely a CEO board.
Michael Patriarca is a former bank regulator who's now at Promontory Financial Group. He says board members need to know the industry, but even more important they need to be willing to be aggressive, even rude.
Michael Patriarca: Our mothers taught us not to do things like that, but it's really essential for directors.
If board members let their manners inhibit their oversight Patriarca says it's a recipe for disaster.
Patriarca: You have to have the willingness to ask hard questions that could potentially embarrass people in front of the entire board of directors.
And while it's easy for regulators to judge experience, it's harder to know just who will be willing to anger executives by acting like a bulldog in the corporate boardroom.
In Washington, I'm Steve Henn for Marketplace.
I have to disagree with Mr. Palandrome. The Supreme Court ignored the rules of election mentioned in the Constitution during Gore v. Bush, so its not automatically a savior. Nationalizing is not automatically bad, either--the private contractors in Iraq are doing a worse job than the military, which is as nationalized as one can get.
It is amazing that the big banks went along with the politicians and provided loans to unworthy buyers. Securitized these mortgages and with the Federal Reserves Chairman's blessing sold these worthless piece of paper throughout the world and now they are the villians and they need new board of directors. Politicians caused this mess and the American electorate has not been informed of this. Nationalizing the Corporations is not the answer. Politicians make the laws. Goverment cannot run Corporations. We learned this from the history of the Soviet Union, Zimbabwe and other. Nationalizing the automotive industry, financial institutions or the health care will not work. The only hope available is the Supreme Court. If they don't stop this madness. This country is doomed.
