http://www.bloomberg.com/apps/news?pid=20601087&sid=akHeGKwafyHc&refer=home
Feb. 10 (Bloomberg) -- President Barack Obama said financial markets reacted negatively to his administration’s plan to unlock credit and deal with banks’ toxic assets because Wall Street was looking for a quick and painless solution.
“Wall Street, I think, is hoping for an easy out on this thing and there is no easy out,” Obama said in an interview recorded for ABC’s “Nightline” program.
Some banks haven’t been transparent about assets on their books, Obama said. Now they must “just be clear about some of the losses that have been made, because until we do that we’re not going to be able to attract private capital into the marketplace.”
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“You can prolong the agony and shareholders will be happy until they’re not happy, and that could be a year from now or two years from now, or in the case of Japan, eight years later,” Obama said, according to a transcript released by ABC. “Or you can just go ahead and acknowledge that yeah, there’s, there’s a lot of work that has to be done to put these banks back on a firmer footing.”
Obama declined to provide an estimate on the eventual price tag for the bank rescue.
“Ultimately what happens is going to depend on how the markets respond over the long term, not today or the next day, but a month from now or two months from now,” he said.
The best way to win the confidence of investors and taxpayers is to create a program that that has accountability and transparency at its core, Obama said.
The president said he and his economic advisers examined the question of whether to effectively nationalize U.S. banks. “Our assessment was that it wouldn’t make sense,” he said.
That’s because such a system would be impossible to manage given the sheer number of banks in the U.S., the size of the economy and the strong tradition of “private capital fulfilling the core investment needs of this country,” Obama said.
‘Tough Love’
The result is a plan that will “apply some of the tough love that’s going to be necessary” while recognizing that it’s the private sector that will be key to getting credit flowing, he said.
Asked whether government shouldn’t fire banking executives at firms seeking government bailouts, Obama said some are gone as the institutions they led “have effectively collapsed.”
“If you’re going to take money from the taxpayers, then you’re going to be constrained in terms of how you give yourself compensation and shareholders are going to be empowered,” Obama said. “If you’re not taking money, then we’ll let shareholders and boards of directors handle things as they generally have handled them.”
There also are “a lot of banks that are actually pretty well managed,” the president said, specifically citing JPMorgan Chase & Co. and its chief executive officer, Jamie Dimon.
While JPMorgan got $25 billion from the Troubled Asset Relief Program, it has fared better than most of its peers in the crisis. JPMorgan reported a fourth-quarter profit of $702 million while New York-based Citigroup Inc. posted its fifth straight loss.
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