Why Not Bank CEOs?

by: David Sirota

Sun Mar 29, 2009 at 19:17


The Associated Press reports that "General Motors Corp. Chairman and CEO Rick Wagoner will step down immediately at the request of the White House, U.S. administration officials said Sunday." I'm not sure that's a good or bad thing, but I am curious about why the White House would make such a bold demand of a car company the federal government is lending to, but not a similar demand of the banks the federal government partially owns?

What I mean is - how is it that the White House is requesting the resignation of GM's CEO while not doing the same of, say, Bank of America's CEO? In fact, not only is the president not demanding the resignation of bank CEOs, he's actually hosting them for photo ops at the White House. Sure, I know some bank CEOs resigned a few months ago under shareholder pressure, but the Obama administration has never publicly demanded such resignations of the current management that is making the problems worse, nor the resignation of management at the biggest firms (Goldman Sachs, BofA, etc.) that are still in place.

This is what I meant when I wrote in my column last week about a "government of men, not of laws." It just doesn't seem like there's "equal protection under the law" - that is, it doesn't sem like the same standards are being enforced from the White House onto different parts of the economy. In this case, it looks like a real double standard.

So here's the question: Can anyone explain the differing treatment of auto companies and Wall Street firms? Is it just that there are far more Wall Street worshipers like Tim Geithner and Larry Summers in the Obama administration than auto industry representatives? Or is it something else?

I'm genuinely asking this question, and not in a way aimed at defending Rick Wagoner. I just want to know what possible public explanation there could be as to why the White House would push auto company CEOs around while coddling banking CEOs?  

David Sirota :: Why Not Bank CEOs?

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Why Not Bank CEOs? | 50 comments
maybe the ppl working on the auto bailout are better than the (4.00 / 1)
folks working on the bank bailouts (i.e. geithner et al).  

'Cos banks are not union... (4.00 / 3)
And Americans hate GM even more than they hate the banks.  Banks are hated by the left and liked by the right.  The left and right both equally hate GM...

As unpopular as the bank bailouts are, the GM bailout was even more unpopular.  People like to stick it to the little guy, i.e. the blue collar schmuck who doesn't "deserve" decent wages and benefits.

Apparently, the administration did consider replacing TARP CEO recipients, but Geithner intervened.  bush did replace the CEO's of AIG, Freddi Mae and Freddie Mac.

REID: Voting against us was never part of our arrangement!
SPECTER: I am altering the deal! Pray I don't alter it any further!
REID: This deal keeps getting worse all the time!


I don't think that's true (0.00 / 1)
The problem is that Americans have, or their parents had, visceral experience with GM products. No one's ever driven a credit default swap.

[ Parent ]
Is he the CEO of a union? (0.00 / 0)


"It sounds wrong...
     ...but its right."


[ Parent ]
Maybe you have a short memory? (2.67 / 3)
Citibank--Chuck Prince-GONE

Merrill Lynch--Stan O'Neal-GONE, John Thain-GONE, actually, Merrill Lynch- GONE

Lehman-GONE

Bear Stearns-GONE

AIG-Marty Sullivan-GONE

WaMu, Wachovia - GONE


Ummm...no... (3.00 / 4)
Um, not at the White House's public request. And what about the biggest of the big players - Goldman Sachs? Bank of America? Bueller...Bueller...?

Stop trying to misdirect.


[ Parent ]
Goldman Sachs is returning TARP funds.... (0.00 / 0)
...within the month... never even wanted it, supposedly.. was pressured by Paulson to take it to hide how bad Citi and Boa were...

REID: Voting against us was never part of our arrangement!
SPECTER: I am altering the deal! Pray I don't alter it any further!
REID: This deal keeps getting worse all the time!


[ Parent ]
Goldman (4.00 / 8)
Goldman also lobbied for the no-strings-attached bailout of AIG because its money was insured there. In other words, they didn't need TARP nearly as much as they needed the AIG bailout.

[ Parent ]
Lessee here... (4.00 / 3)
Goldman is gonna pay back 10 billion after having received close to 13 billion bucks worth of TARP money that was laundered...er...funneled...er...paid out through AIG. R...i...g...h...t.

When it come to GS, the laundered AIG TARP money is just the tip of the iceberg. In fact, all told we are talking about more than $22,000,000,000.00 bucks.

If not for the bailout money, Government Sachs would be in a world of hurt. To believe otherwise requires that you be naive, ignorant, misinformed or some combination of the three.


[ Parent ]
Well...perhaps... (0.00 / 0)
You can't ask someone to leave if they left already.  So this does answer part of the question.  "Everyone" claims Goldman Sachs is in okay shape, so this really boils down to Bank of America.

BTW, Bueller...Bueller...? is a Republican talking point.  :-)


[ Parent ]
Maybe they left more willingly (0.00 / 1)
while some folks need a push?  No misdirection, at all.

"It sounds wrong...
     ...but its right."


[ Parent ]
Don't know but... (4.00 / 2)
...a visible transition of the helm seems to be standard operating procedure for receiverships and due diligence when public trust is desired. Speaking to a failed mgmt team or worse, one at the brink, should never be confused with speaking to a recovery or liquidation management team.

So, especially since it's banking, my guess has been leverage from the top 3, possibly with foreign nation pressure. The perception is bad for the President and GM doesn't make up for it.  

I have been asking the same question since day 1. The other obvious question is trigger timing, who/what pulled the switch (or delayed it until just before the election).


Financial vs. Productive Capitalism (4.00 / 6)
At least part of the issue is tied up in the shifting dynamic between productive and financial capitalism.  

John Bogle (founder of the Vanguard Group) gave a very interesting talk on Moyers' show back in 2007 on this topic and, if I remember correctly, predicted much of our current fiasco.

To the BubbleKlass, financial capitalism is what drives the economy and productive capitalism is parasitic upon that driving force.  Bogle claims that this is exactly backwards.

My position is that labor is what always has and always will drive all economies, but taking that position puts me soundly outside the discourse.  Ah well.


how i would edit this: the exploitation of labor drives all economies... nt. (4.00 / 2)


[ Parent ]
It would be an entirely appropriate edit. (0.00 / 0)
While the exploitation factor is not a necessity, it has been and continues to be a fact for most economic systems.  Thanks for adding that important point which I failed to.  

[ Parent ]
If you read Obama's latest townhall transcript... (4.00 / 5)
... he is spewing out the same stuff that Bush and the DLC have been saying all along...

Now, a lot of the outsourcing that was referred to in the question really has to do with the fact that our economy -- if it's dependent on low-wage, low-skill labor, it's very hard to hang on to those jobs because there's always a country out there that pays lower wages than the U.S. And so we've got to go after the high-skill, high-wage jobs of the future. That's why it's so important to train our folks more effectively and that's why it's so important for us to find new industries -- building solar panels or wind turbines or the new biofuel -- that involve these higher-value, higher-skill, higher-paying jobs.

It seems like these guys can't comprehend that these "high skill" and "high wage jobs" would be outsourced in a nanosecond overseas.  How long did it take us to lose nearly the entire high tech industry?  I refuse to believe he is this stupid, regrettably the only answer is that he is beholden to the same interests that have delivered to us the catastrophic trade deals of the last 30 years.

Regards,

Never before in all our history have these forces been so united against one candidate as they stand today. They are unanimous in their hate for me-and I welcome their hatred. - FDR


[ Parent ]
DLC/Obama's most cherished myth: (4.00 / 6)
...implies that we can actually matriculate our way to the top of the globalization heap.

In case some haven't noticed, edubiz had long ago eclipsed labor as the most influential constituency of the Democratic party.

With grades 13-17+ as their most lucrative product line, "free" college-for-all is the unquestioned panacea.  Public financing of more biz/finance majors amounts to laborers financing the "training" of their ultimate outsourcers.  

Or we can enjoy still more trained engineers driving cabs or greeting shoppers...if they're lucky...and not dismissed as overqualified.

Obama's grasp of economics is strangled by its ivy roots.



[ Parent ]
IBM is drooling over all of the data collection in Obama's plans (4.00 / 1)
will offshore it before the money leaves Bernacke's printing press.     I don't know why it is so hard for them to understand that they can't have a consumer based economy without consumers with jobs.   We are all destined for the landfill.  

[ Parent ]
If it's any consolation (4.00 / 2)
Adam Smith would agree with you.

Montani semper liberi

[ Parent ]
Adam wrote a pretty decent book (0.00 / 0)
called The Theory of Moral Sentiments.  Not without its flaws, certainly, but if only people would have read that before reading The Wealth of Nations then things might've be a little better.  Of course, Wealth might not have been so popular if it had directly included all those pesky moral constraints on commerce that he discusses in Moral Sentiments.  Ah well, those Scottish Enlightenment fellows meant well.

[ Parent ]
The answer to your question may be as simple ... (4.00 / 9)
... as who feeds the politicians the most money.  Do the politicians want to disrupt a power structure that they benefit from indirectly via campaign contributions and directly by seamlessly moving from government to big paying jobs on wall street like emanuel and gramm did?

Z


Not that simple... (4.00 / 3)
A more complex, but equally disturbing explanation is that the shepherds of the economy (the ones who make the markets rise and fall each day) would be outraged just outraged! if a slate of finance executives got the ax! They would make the markets suffer, perhaps severely. They will react more mildly to some auto industry finagling.


"Don't hate the media, become the media" -Jello Biafra

[ Parent ]
Bingo! (4.00 / 3)
And since the majority of people's retirements are based on the 401K, we end up being their complete and total bitches.

Whoever came up with the 401K is the guy we shoudl be really going after...

REID: Voting against us was never part of our arrangement!
SPECTER: I am altering the deal! Pray I don't alter it any further!
REID: This deal keeps getting worse all the time!


[ Parent ]
The stick (0.00 / 0)
to match the carrot. Not that complex

"It sounds wrong...
     ...but its right."


[ Parent ]
Dean Baker has been making a similar argument (4.00 / 4)
with regards to protectionism:

If the U.S. government were to hand checks for tens of billions of dollars to the domestic auto industry or the steel industry to help them survive, presumably it would be viewed as a form of protectionism. However, when the checks to the banking industry, for some reason the question of protectionism never arises.

http://www.prospect.org/csnc/b...

Those damn protectionists in the Obama administration obviously don't know anything about economics. How else can we explain the decision to require that the fund managers in their bank bailout plan must be headquartered in the United States.I can't wait to see the outraged and condescending editorials in the Washington Post and elsewhere explaining how protectionism is not the way to promote jobs and growth.

http://www.prospect.org/csnc/b...

"Never separate the life you live from the words you speak" -Paul Wellstone


There's also.... (4.00 / 1)
There's also power (and influence) in numbers.  15 major banking CEOs met with Obama, while the three major auto CEOs met with Congress.  According to latest figures, starting March 2008 and ending March 2009 in total taxpaying secured layout:  Bear Sterns 30B; Fannie & Freddie 200B; AIG (first time around) 85B; Auto (GM & Chrysler)25B; TARP 700B; Citibank 247.5B; AIG (second time) 65B; Obama's Stimulus Recovery package 787B; Housing (foreclosure mitigation etc) 200B; AIG (third request) 30B

What does that say about Obama? (4.00 / 1)
I'm sure they wouldn't have refused.  

[ Parent ]
Let's be honest here (4.00 / 1)
it wouldn't be a good thing to have gm ceos in charge of the government either.  That would kill the environmental movement and they certainly don't represent the interests of the workers either, though they don't want to see them completely unemployed like the banking industry does.

My blog  

Quick thought (0.00 / 0)
Banks will be subject to a whole new universe of regulations, permanently, once this whole mess is over (at least that is the theory, and the plan). Auto companies will not, so temporarily engaging in a more hands-on approach makes sense. Make big changes now then leave the industry to deal in the market once it is, er, "rehabilitated".

There is a huge difference between simply helping car companies become competitive again, on the one hand, and remaking the entire banking and finance sector of the global economy, on the other. The latter challenge will never succeed through stop-gap measures like limiting bonuses or firing executives. Only a brand new regime of regulations can do that.


"Don't hate the media, become the media" -Jello Biafra


I think we will have to wait until tomorrow... (4.00 / 2)
...to get a better feel of what is going on.  My gut instinct is that it will not be good for American autoworkers and retirees.  If it is an anti-automotive industry move by the administration, having just pumped hundreds of billions into the financial industry, I am prepared to regard this administration my adversary, and begin working for its defeat.  For me a lot rests on how they deal with the automotive industry.

Regards,

Never before in all our history have these forces been so united against one candidate as they stand today. They are unanimous in their hate for me-and I welcome their hatred. - FDR


I disagree that the administration is an adversary (0.00 / 0)
But, notice, that's not a criterion for Troll Rating.


"It sounds wrong...
     ...but its right."


[ Parent ]
Sorry,,, (0.00 / 0)
...I was taking the troll rating as humorous way of saying you disagree...not as a true troll.

Regards,

Never before in all our history have these forces been so united against one candidate as they stand today. They are unanimous in their hate for me-and I welcome their hatred. - FDR


[ Parent ]
/an EW post (4.00 / 1)
For the same reason that Steven Rattner who knows nothing about the auto industry is influential on the auto task force but no one who knows nothing about Wall Street is dealing with the banks. The outsider can perceive that management is doing a bad job.

/an EW post  

Darkness has a hunger that's insatiable, and lightness has a call that's hard to hear.  


bmaz is sticking up for Wagoner (0.00 / 0)


Darkness has a hunger that's insatiable, and lightness has a call that's hard to hear.  

[ Parent ]
Another thing I am getting sick of.... (4.00 / 2)
....are these politicians of both parties attacking automotive industry leaders, when in fact it is those politicians of both parties themselves that have been integral in destroying our economy.  It was Republicans and Democrats who have passed the catastrophic trade agreements of the last 30 years.  And I still do not see either party trying to correct it.  Obama so far seems to be doing nothing, in fact in his usual way of trying to have it both ways, it looks like all his talk about it in the past was just "in the heat of the campaign" talk.  In other words lies.  I hope he proves me wrong, but I wouldn't bet on it.

Regards,

Never before in all our history have these forces been so united against one candidate as they stand today. They are unanimous in their hate for me-and I welcome their hatred. - FDR


Best possible fit (4.00 / 2)
Oddly Rick Wagoner has been a terrible CEO for GM but he's quite possibly the best possible person for this moment.  He's a top of his class grad in finance from Harvard Business School and started out his GM career doing very well at a variety of finance posts. He knows where the bodies are buried because he buried them.

Wagoner has shown terrible ham-handedness when it comes to PR (feuding with the LA Times car section and trying to use ad dollars to get the LAT to retract unfavorable reviews), to manufacturing, to any sense of strategic vision.  The thing is, Wagoner is finally in his element (where his qualifications are better or equal to the bank guys).

Ideally, Wagoner would do finance and somebody else would rebuild the business who had a better head for either marketing or engineering.  Wagoner has consistently forced the unions into corners and ripped them off badly.  He did it when Delphi was spun off (the former DELCO) dumping $50 billion in pensions but maintaining control for some unfathomable reason.  His deal selling 51% of GMAC to Cerberus nearly throttled the company because under new management it was far harder to get loans from GMAC. (minimum credit score of 700) than any bank.  It cost hundreds of thousands of unit sales and maybe a lot more.

Maybe Wagoner has burned too many bridges but given the one sided nature of concessions any GM CEO would be hated.

Obama had an opportunity to kill the Republican party in Michigan and cripple it in some of the neighboring states by restructuring the deal in favor of the union and the retirees.  Given the small bucks (compared to AIG) he should have done that. The Republican Plan was not passed by law so he had no legal obligation to stick to the monster. Geez, Louise.


Not a word about this on kos (4.00 / 2)
The recommends has a story about people not vaccinating their kids.

The place has been taken over by total pods.

My blog  


DH is writing (4.00 / 2)
ridiculous articles comparing Obama to Roosevelt.  What an alt universe it has become since the obama bots took it over.  

My blog  

[ Parent ]
Funny you should mention that... (0.00 / 0)
I was just thinking about that. I come to Open Left first before kos simply because it's all just a bunch of Repub bashing. I mean, I don't really care about what the other side said. I want to know about real issues and OL is definitely more thought provoking than an anger fest they got goin' over there.

[ Parent ]
The most important reason he is doing (4.00 / 2)
it is because he can. Americans will let him, without complaint.  

Why aren't the bloggers calling for civil disobedience.  I am sick all the protest being organized by iac.

My blog  


Are you suggesting I take to the streets to prevent a CEO (0.00 / 1)
that has overseen the huge decrease in his companies market-share during his time in office from losing his job?


"It sounds wrong...
     ...but its right."


[ Parent ]
no (4.00 / 3)
I am saying we should call Obama OBAMA  on HIS hypocrisy, and poor priorities.

Nothing will demonize liberalism more than wasting tax dollars on Walstreet bafoons, and killing job in Detroit, when people are living in tent cities.



My blog  


[ Parent ]
Two Wrongs Don't Make A Right (0.00 / 1)
I don't disagree that people like Ken Lewis and Vikram Pandit should be gone. However, it is pretty clear that Rick Wagoner has been a dreadful CEO of GM and he should be gone.  Keeping him around because the govt isn't moving quickly enough to get rid of the bank CEOs makes no sense.

In 1994, Wagoner was made head of GM North America and the company had 32% of the US car/light truck market.  Today it has 18.8%.  Couple that with his decision to kill the EV-1 and to double down on SUVs in 2005-06 after it was clear the market had peaked and I think there are plenty of reasons why the guy should be fired.  I don't get why boards keep people like him around when it is clear they are failing.  

The only good decision Wagoner made was to push the Chevy Volt but it is turning out to be too little too late.

I imagine that by the time GM is done restructuring it will be down to the Chevy, Cadillac and either GMC or Buick brands.  


Why Is This Comment Troll Rated? (4.00 / 1)
How did this break the rules?  By saying that Wagoner has been a bad CEO and should be fired?  I am all for firing bank execs but I think Wagoner needed to go too.  

[ Parent ]
FLGibsonJr (4.00 / 1)
Got up on the wrong side of the bed this morning, apparently.  

"It sounds wrong...
     ...but its right."


[ Parent ]
I just heard the points of Obama's automotive speech... (0.00 / 0)
...and I am now feelng even worse!

Regards,

Never before in all our history have these forces been so united against one candidate as they stand today. They are unanimous in their hate for me-and I welcome their hatred. - FDR


[ Parent ]
Least you've got your sense of humor back (0.00 / 0)
unless that wasn't a joke.....


"It sounds wrong...
     ...but its right."


[ Parent ]
Keeping him around? Who is arguing for that. (4.00 / 1)
The argument is that Wagoner and the CEOs of all WS bailouts should be fired.  Not to apply it across the board it the height of hypocrisy.  Reward for failure?  Lets talk about KBR continuing to get government contracts to fix the wiring they did in their first government contracts and that are electrocuting soldiers in their showers.  Lets talk about Obama's ridiculous suggestion that veterans should pay for their war injuries with their private insurance policies.

The problem is the hypocricy and the fact that Obama is out of touch with main street.  


[ Parent ]
David go ask... (0.00 / 0)
     Barack Bilderberg Obama..!

     "Ours is not a system based upon trust but one of suspicion.."  Thomas Jefferson

Why Not Bank CEOs? | 50 comments
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