Neel Kashkari, the assistant Treasury Secretary for financial stability who has run the bailout since the Bush administration, took some frustrated questions today from Democratic Reps. Diane Watson (CA) and John Tierney (MA) during his appearance before a House oversight subcommittee.
Watson and Tierney were searching for a way to prevent banks that take bailout money from planning lavish parties and sales conferences before repaying the taxpayers — an embarrassing pattern that has been seen at Northern Trust, Bank of America, and Wells Fargo in recent weeks.
Kashkari said the Obama administration would seek approval from bailed-out banks’ boards of expense standards that would govern spending on resort conferences, private jets, office re-decorations, and other goodies.
Those standards will be made “clear and public for the world to judge,” Kashkari told the lawmakers — though he acknowledged that the new standards would be in effect going forward as opposed to retroactively. There is one exception, he said …
… a policy that requires banks to get Treasury’s approval before changing their current expense rules: “Some of that is [in effect] going backward.”
Kashkari made clear to the Democrats that he wouldn’t defend bailed-out banks’ spending habits … but his explanation sounded an awful lot like a defense. “Banks do need to market themselves; unfortunately, they do need to have sales conferences,” he said, describing “some of the press stories that have really inflamed people” as merely summations of “ordinary” bank industry conferences.
When Treasury witnessed spending that “we though [was] over the top,” Kashkari added, “we’ve let the banks know … whether we have the legal ability to force them to do something [or not], they’ve got it, they have said, ‘Sorry, it’s not going to happen again.'”
Given the rising tide of populist furor from both parties in Congress these days, “sorry” from the banks is unlikely to be good enough.
