U.S. Sen. Elizabeth Warren (D-Mass.) wants the Federal Reserve Bank to draw up stringent regulations for corporate recipients of U.S. bailout funds – and to prosecute company executives if they “provide fraudulent or misleading information or misuse funds.”
Warren noted, in a letter to Fed officials that was publicly released: “Following the 2007-2008 financial crisis, multiple companies improperly accepted bailout money and abused taxpayer-funded relief programs such as the Troubled Asset Relief Program (TARP).” In other words, the federal government should not repeat past mistakes.
Warren said it would not be enough to “to simply require CEOs and executives to check a box claiming that they intend” to meet program requirements. Instead, the senator called for several requirements for the current bailout program:
“First, the certification procedures put in place must be robust and comprehensive.
“Second, businesses must be required to reaffirm their eligibility so long as bonds they issue have not yet matured and any syndicated loans remain outstanding. This means that CEOs and executives should be required to periodically conduct due diligence to ensure that they still meet the relevant eligibility criteria.
“Third, all certification paperwork should contain clear language that indicates that the executives are subject to civil and criminal penalties, including disgorgement, if they provide fraudulent or misleading information or misuse funds, and should be required to immediately repurchase their bonds for the full amount when eligibility criteria are breached.”
Warren said she still hoped that “the Fed will impose stronger conditions attached to these funds, as I have previously requested.”
The Fed has “been entrusted to administer these bailout funds,” Warren wrote. “It is incumbent on you to develop a comprehensive certification process that adequately protects the taxpayers who provided them, and it is incumbent on you to develop a comprehensive certification process that adequately protects the taxpayers.”
The overall goal, she said, “is to ensure that the primary beneficiaries of this bailout are workers, not executives and shareholders.”