Geithner Says He Can Fire Bank CEOs

Secretary Geithner has been late to every party he has attended since talking over Treasury. His plans have often been tardy and full of holes. He seemed to redeem himself with the new public/private program to buy toxic assets from banks. It does have critics who say it will eventually cost taxpayers and enrich hedge funds, but those concerns appear to be subordinate to fixing the big financial firms.

Yesterday, Geithner said he could fire the executives at big banks that get government money if they cannot run their companies well. According to CNNMoney, in an interview when asked whether he left open the option to pressure a bank CEO to resign, Geithner responded, “Of course. Of course.”

Since the Treasury and Fed have pushed Citigroup (C) to replace almost its entire board and allowed CEO Vikram Pandit to remain and supplied Bank of America (BAC) with capital to stay in business, the government has had the power to replace management for some time. Their stewardship has been poor enough to justify it.

Geithner’s comments are almost certainly a reaction to the government’s dismissal of GM (GM) CEO Rick Wagoner. The persistent argument since then is that banks did much more to hurt the economy than car companies have. Banks have taken more government capital. If a car company can be force to fire its chief, why should banks be different?

The question Geithner did not answer, a question that has been floating around the press for weeks, is why some of the bank CEOs still have their jobs. He does not have answer, perhaps out of embarrassment. Now that banks are doing a bit better, he may have lost his easiest chance to act. If banks take a sharp turn for the worse, he gets to live with criticism that he deferred that decision.

Douglas A. McIntyre