Dallas Fed Urges Removal of CEOs of Bailed-Out Banks

Bloomberg reports:

The Federal Reserve Bank of Dallas said taxpayer aid to failing banks should come only after the voiding of all employment and bonus contracts and the removal of chief executive officers and boards of directors.

“A set of harsh, non-negotiable consequences” for requesting U.S. Treasury assistance might also include “clawbacks” to gain cash and stock bonuses paid the top management team during the prior two years, the Dallas Fed said today in a slide presentation on its website.

The proposal reflects Dallas Fed President Richard Fisher’s view that large U.S. banks need to be split apart because they operate with an implied government safety net that puts their risks of failure on taxpayers. Fed Chairman Ben S. Bernanke said at an April 25 news conference in Washington that policy makers were “making some progress” in averting bailouts by “substantially” increasing supervision and requiring higher levels of capital.

Ouch.