Watchdog: "All The Chips Are On The Table" With Stress Tests
"All the chips are on the table," Elizabeth Warren, chair of the congressional oversight panel for TARP funds, said on CBS' The Early Show Thursday.
While the tests are designed to evaluate the financial health of the country's 19 largest banks, they also serve as a test of the government's ability to manage the credit crisis that has choked economic growth in the nation.
Warren noted the changes in the Treasury's approach from October, when the original $350 billion cash infusion into banks implemented by Bush Treasury Secretary Henry Paulson received a "lot of backlash." Timothy Geithner, Treasury's current head, placed more restrictions on banks receiving federal aid, but the stress tests will be a pivotal moment for the Obama administration.
"And now here it is. We've got something that at least seems to divide banks into two categories and it gives Treasury an opportunity to be very transparent, to hold the financial institutions accountable and to be very clear about the government policies dealing with them," Warren said.
But the two categories – banks with enough capital and banks that need to raise more cash – should not impact consumers' decisions on where to place their money, Warren said.
"I think Americans have been really good about remembering FDIC insurance. If we're talking about your checking account, your savings account, those are fully ensured and it doesn't matter where they are."
Should banks require more federal aid, Warren said the dynamic in the relationship between the banks and the government will need to change.
"For decades, the banks and their regulators talked to each other and they didn't talk to the rest of us. Now that we have American taxpayer dollars that are making this whole system work, it's now a three-party conversation. And the American taxpayer has a seat at the table in both the conversation and in the decisions that get made."