Should we fire CEOs and liquidate their banks?
A Congressional panel headed by Harvard Law School professor Elizabeth Warren is suggesting it's time to fire bank CEOs and liquidate the banks they ran. As Jon Stewart would say, "Me like-y."
The panel is not suggesting that the firing and liquidation happen en masse. Rather, it simply argues that the Treasury's approach denies the reality of just how bad the banks' financial condition is and leaves those sick banks in control of the very people who got them into the toxic-waste business. The Panel suggests that CEOs of sick banks have a too-rosy view of their institutions' prospects.
What is most striking about the panel's report is the political courage it takes to publish the report and its relative objectivity. Since Warren is not on the Wall Street payroll, as others like Larry Summers clearly are, her panel is in a position to look at the problem in the cold hard light of reality. If the U.S. chooses to liquidate the institutions that are in the worst shape and that liquidation is carried out in an orderly manner, the rest of the financial system will be spared.
Unfortunately, since there is so much political momentum behind the $1 trillion plan to enrich hedge funds by paying them to buy toxic waste, I predict that this brave, direct-bulls-eye of a report will be ignored.
Peter Cohan is president of Peter S. Cohan & Associates. He also teaches management at Babson College. His eighth book isYou Can't Order Change: Lessons from Jim McNerney's Turnaround at Boeing.