This was a helpful post and a fair treatment of what Levin had to say.

But at the risk of sounding shrill today, I'll just point out that the linked story at the top about questions "lingering in the background" was from Elana's earlier TPM post today about the "haunting" double standard. So we are reporting on news of lingering doubts that we ourselves have insisted should linger.

There is a double standard because the Detroit 3 is seen as a regional issue, so all Reps from States without Detroit 3 plants wanted to slam them, especially in the japanese auto states, as the US is essentially bailing out their competition. Whereas everybody has a stake in the bank bailout mess.

Bank CEO's did lose their jobs - I don't know why folks are acting like they didn't.

oh please, Levin is no one to talk about anyone else's double standards!

no politician has single-handedly helped do as much direct environmental damage as Levin. he has fought and fought and fought against sensible environmental regulations for years just to pander to the auto giants' CEOs. obviously he wasn't doing this for the workers!

and now he's all mad that this guy who has done a demonstrably terrible job is being forced out?

spare us, Mr. Levin.

All the auto CEO's weren't asked to leave, just one.

Must have more to do with the individual company rather than "the auto industry."

The new president of GM said the company would take whatever steps necessary to save itself including bankruptcy

That may well be why Wagoner got s-canned
This is a defacto Chapter 11. The real deal is the club. Avoiding it the carrot

Now, while Chrysler and GM are very different companies with very different paths forward, both need a fresh start to implement the restructuring plan they develop. That may mean using our bankruptcy code as a mechanism to help them restructure quickly and emerge stronger. Now, I want everybody to be clear about this. I know that when people hear the word "bankruptcy" it can be unsettling, so let me explain exactly what I mean. What I'm talking about is using our existing legal structure as a tool that, with the backing of the U.S. government, can make it easier for General Motors and Chrysler to quickly clear away old debts that are weighing them down so that they can get back on their feet and onto a path to success; a tool that we can use, even as workers staying on the job building cars that are being sold....What I'm not talking about is a process where a company is simply broken up, sold off, and no longer exists. We're not talking about that. And what I'm not talking about is a company that's stuck in court for years, unable to get out.

Wagoner deserved to go, but that doesn't mean there's not a double standard.

And the Atlantic Monthly article Josh linked to over the weekend explains why.

The crash has laid bare many unpleasant truths about the United States. One of the most alarming, says a former chief economist of the International Monetary Fund, is that the finance industry has effectively captured our government—a state of affairs that more typically describes emerging markets, and is at the center of many emerging-market crises. If the IMF’s staff could speak freely about the U.S., it would tell us what it tells all countries in this situation: recovery will fail unless we break the financial oligarchy that is blocking essential reform. And if we are to prevent a true depression, we’re running out of time.

That's the editorial intro.

Johnson:

[T]he real concern of the [IMF]’s senior staff, and the biggest obstacle to recovery, is almost invariably the politics of countries in crisis.

Typically, these countries are in a desperate economic situation for one simple reason—the powerful elites within them overreached in good times and took too many risks. Emerging-market governments and their private-sector allies commonly form a tight-knit -- and, most of the time, genteel -- oligarchy, running the country rather like a profit-seeking company in which they are the controlling shareholders. When a country like Indonesia or South Korea or Russia grows, so do the ambitions of its captains of industry. As masters of their mini-universe, these people make some investments that clearly benefit the broader economy, but they also start making bigger and riskier bets. They reckon—correctly, in most cases—that their political connections will allow them to push onto the government any substantial problems that arise.

In Russia, for instance, the private sector is now in serious trouble because, over the past five years or so, it borrowed at least $490 billion from global banks and investors on the assumption that the country’s energy sector could support a permanent increase in consumption throughout the economy. As Russia’s oligarchs spent this capital, acquiring other companies and embarking on ambitious investment plans that generated jobs, their importance to the political elite increased. Growing political support meant better access to lucrative contracts, tax breaks, and subsidies. And foreign investors could not have been more pleased; all other things being equal, they prefer to lend money to people who have the implicit backing of their national governments, even if that backing gives off the faint whiff of corruption.

But inevitably, emerging-market oligarchs get carried away; they waste money and build massive business empires on a mountain of debt. Local banks, sometimes pressured by the government, become too willing to extend credit to the elite and to those who depend on them. Overborrowing always ends badly, whether for an individual, a company, or a country....

The downward spiral that follows is remarkably steep. Enormous companies teeter on the brink of default, and the local banks that have lent to them collapse. ... The government, in its race to stop the bleeding, will typically need to wipe out some of the national champions—now hemorrhaging cash—and usually restructure a banking system that’s gone badly out of balance. It will, in other words, need to squeeze at least some of its oligarchs.

Squeezing the oligarchs, though, is seldom the strategy of choice among emerging-market governments. Quite the contrary: at the outset of the crisis, the oligarchs are usually among the first to get extra help from the government, such as preferential access to foreign currency, or maybe a nice tax break, or—here’s a classic Kremlin bailout technique—the assumption of private debt obligations by the government. Under duress, generosity toward old friends takes many innovative forms. Meanwhile, needing to squeeze someone, most emerging-market governments look first to ordinary working folk—at least until the riots grow too large.

But those are "emerging markets", right? Banana republics, Third World stuff.

In its depth and suddenness, the U.S. economic and financial crisis is shockingly reminiscent of moments we have recently seen in emerging markets (and only in emerging markets): South Korea (1997), Malaysia (1998), Russia and Argentina (time and again). ...

But there’s a deeper and more disturbing similarity: elite business interests—financiers, in the case of the U.S.—played a central role in creating the crisis, making ever-larger gambles, with the implicit backing of the government, until the inevitable collapse. More alarming, they are now using their influence to prevent precisely the sorts of reforms that are needed, and fast, to pull the economy out of its nosedive. The government seems helpless, or unwilling, to act against them.

Johnson does offer a solution -- similar (surprise!) to what Galbraith, Black, Krugman, Stiglitz, et al have been discussing -- break up the megabanks, take insolvent banks into receivership, put toxic (sorry, "misunderstood", uh, "troubled", uh, "legacy") assets into a RTC-style entity, restructured banks placed back into the private sector where they can lend again, dispose of the old executives who brought the mess on, institute curbs on executive pay to prevent the emergence of a new oligarchy; regulate, and tax. In short: restructure the system, and oh btw, squeeze the oligarchs.

He's not optimistic that it will happen, nor am I.

The conventional wisdom among the elite is still that the current slump “cannot be as bad as the Great Depression.” This view is wrong. What we face now could, in fact, be worse than the Great Depression—because the world is now so much more interconnected and because the banking sector is now so big. We face a synchronized downturn in almost all countries, a weakening of confidence among individuals and firms, and major problems for government finances. If our leadership wakes up to the potential consequences, we may yet see dramatic action on the banking system and a breaking of the old elite. Let us hope it is not then too late.

Strap in, folks.