Wagoner's Eviction from GM Serves Notice to Other CEOs
Story from the Wall Street Journal

If any U.S. banks need more cash from the government, they might have to sacrifice their chief executive to get it.

The Obama administration's ouster of General Motors Corp. CEO Rick Wagoner under the threat of withholding more bailout money underscored the potential pressure on top executives of large banks being evaluated by Treasury Department stress tests to see if they need additional capital.

Treasury Secretary Timothy Geithner said Sunday that some financial institutions would be found lacking as a result of the examinations. If those banks can't raise the money from private investors and so turn to the government, the jobs of some chief executives could be on the line, according to some bank analysts and lawyers.

Asked whether another round of government help following the stress tests would trigger regulatory encouragement to fire executives, Jeff Davis, the director of research at Howe Barnes Hoefer & Arnett Inc. said: "Emphatically, yes."

"You've got to figure it is coming," Mr. Davis said.

Banks are much more tightly regulated than automobile manufacturers, and it isn't unusual for bank regulators to demand changes in top management. But those changes are usually done discreetly, by pushing the board to fire the CEO, said Sanford Brown, a managing partner with law firm Bracewell & Giuliani LLP who served in the Office of the Comptroller of the Currency during the late 1980s.

"Regulators usually don't make overt demands," he said.

In addition, while CEO dismissals might satisfy public outrage at bankers, such moves could deepen concerns among investors, said Kip A. Weissman, a partner at Luse Gorman Pomerenk & Schick PC. "It would be a massive vote of non-confidence " in the banking industry, he said.

Among the bank CEOs considered vulnerable by some analysts and investors are C. Dowd Ritter, chairman and chief executive of Regions Financial Corp., a regional bank based in Birmingham, Ala. Regions is struggling with rising losses tied to commercial and residential real-estate loans.

A bank spokesman said Monday: "Regions remains well capitalized and we do not see a correlation with what is going on with the U.S. auto industry."

Like Mr. Wagoner of GM, Mr. Ritter led his company during the period leading up to its financial troubles.