CEOs have few answers about TARP funds

February 11, 2009 6:55:02 PM PST
What happened to the money? That was the question posed to CEO's of the country's eight largest banks that took billions in Troubled Assets Relief Program (TARP) funds.

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They were summoned to explain how they used billions in tarp funds. What lawmakers heard ran short of apologies.

"But we didn't do everything right, far from it, and make no mistake, as head of the firm, I take responsibility for our performance," Morgan Stanley CEO John Mack said.

Their testimony did not impress Stephen Pizzo, an author from Sebastopol who wrote extensively about the savings and loan crisis of 30 years ago.

"All of that stuff that goes before Congress and these guys is just a Kabuki dance; they know they're going to get beat up there, it's like they're going to purgatory for an afternoon," Pizzo said.

Vermont Sen. Bernard Sanders challenged Treasury Secretary Tim Geithner whether these banks should purge their leadership as a condition of future bailout money.

Sen. Bernard Sanders: But we are not going to fire the leadership, and we're going to keep the same guys who caused this crisis in power and who made huge sums of money?

Treasury Secretary Tim Geithner: Where we think that is the most effective strategy for our country, we will do that.

Critics worry that keeping the same bank managers will lead to more of the same decision making.

"Until those people are dealt with in a way that any employer would deal with an employee who screwed up that badly, it's not going to make a difference," Pizzo said.

Besides trillions going into stabilizing banks, dozens of economists have put their names on an ad to criticize trillions of spending in the stimulus bill, including San Jose State University economics chair, Lydia Ortega.

"At what cost are we saving jobs, because we don't have money to be saving every job that's only a $30,000 job and pay $200,000 to keep it," Ortega said. Ortega is worried that money will be wasted while driving up debt and taxes. "They want us to use American-only steel. Well, that might save an American job, but it's not going to get the bridge done at the lowest possible cost. So we don't have the efficiency motive in any of this type of legislation."

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