Elizabeth Warren is Troubled Asset Relief Program Watchdog

Elizabeth Warren is set to release a report later this week that will call for some drastic measures to be taken in the continued battle to prevent the financial system from collapsing.

Elizabeth Warren is the chair of the congressional oversight committee that is monitoring the Troubled Asset Relief Program (TARP). Warren, the chief watchdog of the program, called for a number of initiatives that she believes are vital to ensure the health of the financial system.

Warren, in her report, will look at how previous crises were overcome and how the lessons learned can be applied today.

According to Warren, the lessons learned from the past require three things to happen in our present-day situation:

1. The banks must be confident that the valuation of their troubled assets is accurate

2. The management teams of the banks receiving government subsidies must be replace

3. Equity investors in the banks must be wiped out

According to a report on TheObserver, Warren confirmed that she was referring, in part, to firms such as AIG and Citigroup.

Warren will also draw comparisons to our present situation and the situation in Japan in the 1990s, and will warn against government subsidies with "little to no consequences for management or equity investors".

She apparently doesn't directly target Treasury Secretary Timothy Geithner in the report, but maintains that he must address the issues in the report, and that the "very notion that anyone would infuse money into a financially troubled entity without demanding changes in management is preposterous".

It's pretty hard to argue with any of the changes that Elizabeth Warren is pressing for in her report.

Protecting the investments of equity investors and retaining current management teams should not be the priority here - instead, we need to focus on restoring the health of the affected banks (regardless of how they got into their current predicament), which will eventually help to heal the fractured economy.

The big question is - will these proposals from Warren fall on deaf ears?

Source: Guardian.co.uk - US Watchdog Calls for Bank Executives to be Sacked

Filed under: General Market News