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Carmaker, Banker, Broker ...
Posted on Feb 16, 2009
This is a presidency on steroids. Barack Obama’s executive orders alone would be enough for any new administration’s first month: decreeing an end to torture and Guantanamo, extending health insurance to more children, reversing Bush-era policies on family planning. That the White House also managed to push through Congress a spending bill of unprecedented size and scope—designed both to provide an economic stimulus and reorder the nation’s priorities—is little short of astonishing.
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This week, executives from General Motors and Chrysler are reporting on their progress in transforming themselves into lean, mean car-making machines, capable of leading American industry into a new golden age. They will also explain that they need some more money, and fast, or they’ll crash and burn. GM, which got a $9.4 billion cash infusion from the government just two months ago, wants the remaining $4 billion that the Bush administration approved; Chrysler, which got $4 billion in December, needs an additional $3 billion urgently.
Maybe it’s just baby-boomer nostalgia for the car culture of my youth, but I think it’s a good idea for the United States to have a domestic automobile industry. Is there a man or woman alive who believes these will be automakers’ last requests for bailout money from Washington? GM, at least, has done a decent job of capturing market share overseas, so maybe that’s a framework for the company to reinvent itself. Chrysler is so diminished that I wonder if there’s any alternative except getting what’s left of the company ready for sale.
Obama has abandoned plans to appoint a “car czar” to oversee government aid to the auto companies, giving the job instead to a high-level task force. So far, the president has declined to look a central question in the eye: Can GM and Chrysler ever thrive under present management? If the Big Three are not to shrink to the Big One—Ford is managing to survive on its own—Obama and Congress are going to have to oversee GM and Chrysler almost like a board of directors. Go ahead and laugh, but explain to me how even Washington could do a worse job with these two companies than Detroit is doing.
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Dodd added a measure that makes it easier for firms that chafe at Washington-imposed restrictions—on compensation, for example—to pull out of TARP. The details are complicated, but what’s important is that banks and other financial institutions that are relatively healthy may well begin to leave the program. The impression would be that the firms remaining in the program are relatively sick—and people tend to be uncomfortable keeping their money in a bank that can be described as relatively sick.
Treasury Secretary Timothy Geithner has fought against transparency in the bailout program that would let everyone see which banks have pneumonia and which merely have a cold. My belief is that the pneumonia-versus-cold distinction was bound to become evident, with or without the Dodd amendment. In any event, if one of our big banks was seen to be in danger of failing—becoming, in effect, a Dead Bank Walking—the Obama administration would have few choices other than to nationalize it.
Then there’s the housing problem, which may be the most difficult of all. Foreclosures and plummeting home values are at the heart of the economic crisis. Either millions of Americans are going to lose their homes, or millions of mortgage contracts are somehow going to be modified. That’s not an attractive choice.
All Barack Obama wanted was to be president. He may have to become an auto executive, a banker, a mortgage broker and who knows what else before this crisis is done.
© 2009, Washington Post Writers Group
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