Geithner says U.S. could replace management at banks

Treasury Secretary Timothy Geithner said Sunday that banks needing ‘exceptional’ U.S. aid may be forced to make management and board changes.

“When, in the future -- or I'll just say, if, in the future, banks need exceptional assistance in order to get through this, then we'll make sure that assistance comes with conditions, not just to protect the taxpayer but to make sure this is the kind of restructuring necessary for them to emerge stronger. And where that requires a change of management of the board, we'll do that,” Geithner said on CBS program Face the Nation.

Geithner has noted that the U.S. has already made changes at a pair of companies it has heavily invested in, such as mortgage finance companies Fannie Mae and Freddie Mac, as well as giant insurer American International Group Inc.

In considering what steps to take to help banks in the future, the U.S. is conducting tests on banks to determine if they could survive even tougher economic situations than the nation already faces.

Geithner also denied that the Obama Administration is allowing banks to sidestep legal restrictions.

“Our obligation is to apply the laws that Congress just passed,” he said. “We want the American taxpayer’s assistance going to generate greater lending, not providing excess compensation.”