No Shock over Government Handling of Automakers

by Alexander Wissel

We’ve heard everyone from the far right to the far left criticize the administration’s plan to kick out General Motors (NYSE: GM) CEO, Rick Wagoner, and the resulting “back to the drawing board order.” The outcry has been a little on the ridiculous side. Let’s face it – he deserved it.

What seems to be scaring investors is that they believe the very essence of our capitalist society is on the verge of breaking down. But that’s simply ludicrous. Wall Street has plunged over the news in the past couple of days, still with no idea of what to make of it all.

In many ways it reminds us of teenagers who just found out their parents are “joining them” in going to a movie theater with friends – not happy.

But let's face it, the government was asked by these companies to lend outrageous, and many times obscene, amounts of money to keep these private companies going - without which, they surely would be liquidating or already in bankruptcy.

We’ve written about the U.S. automakers before, here, so it's no surprise that they got what they deserved. Ultimately, any organization needs to be wary of whom they allow to take a majority ownership stake. Not all majority shareholders are benevolent Warren Buffett types. For example, a politician who takes large sums of campaign contributions from a tobacco/nuclear waste/drug/oil company pretty much has to realize that they are beholden to that company if they get elected.

It also means that when they accepted that money, they knew the risks, and accepted that their contributors would own their official positions. It works the same way in the boardroom. Whoever owns a majority of the shares makes the rules and sets the agenda.

The companies who accepted large amounts of TARP, bailouts and handouts had to understand that they were giving over control. And now they’re crying foul.

The smart companies are already figuring out ways to give the money back, and get the government out of their books. The ones that can’t… well, one of the great things about our capitalist system is that these companies' corporate ideals, systems and principles will die with them.

And in some of these cases, they probably should have been put out of their misery a long time ago.

Comments

[A real Amer...:]

So too, should the banks be allowed to fail, not hand them over 1 trillion dollars of hard earned taxpayer monies.

Apr 01 05:54 AM

[ecliptix543:]

So it only took the government a year to come around.. Well, at least it's some small measure of progress. At this rate, we might get out of this debacle in about a decade or two.

Apr 01 05:57 AM

[jpiretti:]

Right after the Lehman collapse, the CDS market reached over 60 trillion dollars. Because there was no clearing house/market to match each side of the transaction, we are not sure how much of that 60T was insurance of individual bonds or naked put buying. The question I have is who had positions (naked) essentially betting on a widespread corporate debt collapse, how much of the 60T was it and were these folks in a position of power (Wall St. executives) to create crisis for profit...I know it sounds conspiratorial, but just spit ballin'.


On Apr 01 05:54 AM A real American wrote:

> So too, should the banks be allowed to fail, not hand them over 1
> trillion dollars of hard earned taxpayer monies.

Apr 01 08:46 AM

[ddearborn:]

OK SO 10+ TRILLION for banks/bankers/bank investors who lied, cheated, stole, etc... and continue to do so. Result, tax payer funded buyouts, massive layoffs, more jobs offshored, no reduction in home mortgage foreclosures, no change in credit card interest rates to consumers, no change in bankrupcy laws for consumers, massive bankruptcy tax breaks for finanancial institutions, massive bonuses for complete failure, zero legitimate oversight.

US car makers get 40 billion, Union CONTRACTS allowed to be broken (coming soon) CEO's fired, terms dictated, massive micomanaging, millions of jobs in peril and soon to be lost.
Hmmm....trillions for a few rich bankers and jack sh*t for the working stiffs (who happened to pay a lot of the taxes-no offshore accounts for them)

The biggest robbery and transfer of wealth in the history of mankind
Once the man in street finally figures it out there will be revolution.

Apr 01 09:38 AM

[kelm:]

There are a lot more boards, CEOs and senior executives that need to go. GM's board should be extremely embarrassed that they allow Wagner to lose $70 billion and it finally takes the President of the United States to fire him. The same medicine should be applied to the banks. The CEOs and the boards of those that have been most mis-managed need to go. Pandit at Citi is an example. I expect we will see more of this later. What Obama has done is make it clear that he can make changes personally if boards are not willing to do so. That is a sad state of affairs that the President has to take such steps but it is sadder that the boards of the greatest capitalist companies in the world are incapable of doing so.

Apr 01 09:45 AM

[ain't no fo...:]

it just speaks to the denial, arrogance and hubris that has characterized these "C" level cretins and their rubber stamp BOD's for decades now, especially but certainly not limited to the financials, as their sole raison d'etre has been to quietly offload shareholder equity to their personal accounts via massive stock option awards and other self serving bonus programs while claiming they are increasing shareholder value - whereas in fact they are robbing the shareholders blind.

I believe that NO "C" level officers in any publicly traded company should be allowed to participate in stock options programs that are rubber stamped by their BOD... rather, all executive stock option and bonus plans should be reviewed and approved by an impartial 3rd party executive compensation committee made up of, among others, shareholder representatives, non affiliated executive compensation firms, and outside business executives.


On Apr 01 09:45 AM kelm wrote:

> There are a lot more boards, CEOs and senior executives that need
> to go. GM's board should be extremely embarrassed that they allow
> Wagner to lose $70 billion and it finally takes the President of
> the United States to fire him. The same medicine should be applied
> to the banks. The CEOs and the boards of those that have been most
> mis-managed need to go. Pandit at Citi is an example. I expect we
> will see more of this later. What Obama has done is make it clear
> that he can make changes personally if boards are not willing to
> do so. That is a sad state of affairs that the President has to take
> such steps but it is sadder that the boards of the greatest capitalist
> companies in the world are incapable of doing so.

Apr 01 12:16 PM

[henarl:]

GM and Chrysler today - AIG tomorrow!

Apr 01 01:54 PM