WASHINGTON — The U.S. wants to send Treasury Department employees to observe board meetings at banks that have consistently missed dividend or interest payments related to the government's financial-sector bailout.
The Treasury plans to seek permission to send observers to board meetings of banks that miss five payments, one short of the number of missed payments that triggers Treasury's right to appoint board members.
"Placing board observers allows Treasury to gather additional information and perspective on the issues facing the institution, which will help us determine whether to nominate directors," said Tim Massad, chief counsel for the Treasury's Office of Financial Stability. The office manages assets the government acquired through its recent financial sector rescue effort, dubbed the Troubled Asset Relief Program.
Massad said the Treasury will only appoint directors in situations in which it believes "additional independent, qualified persons can contribute to improving the health of the institution."
Observers, who would be drawn from the financial stability office, would not be charged with expressing opinions or otherwise participating in the decision-making process.
Fewer than a dozen banks have missed five payments so far, but that could change come Aug. 17 — the next due date for Treasury dividends. As of the Treasury's May dividend payment due date, one bank had missed six payments, eight had missed five and 19 had missed from.
Despite the missed payments, the Treasury has so far collected more than $15 billion in dividend and interest payments from the hundreds of American banks in which it has become a shareholder.
Treasury plans to make institutions that have received more than $25 million in taxpayer aid its priority, a move that could lessen the pressure on small community banks like Saigon National Bank — the only bank to have missed six dividends so far. The approach also could help Treasury hold down the costs that would be related to its appointing directors to banks' boards.
"We believe this is a prudent and balanced approach to protecting the taxpayer's resources and investments in some of the most challenged banks," Massad said.
Saigon National received $1.5 million in taxpayer aid.