More on the Double-Standard Debate: Did GM Concede More?
Jed Lewison, writing at Daily Kos, observes that GM's Rick Wagoner isn't the only CEO at a bailed-out company to be asked to step down by the government -- a counterpoint to the double-standard question raised today by Sen. Carl Levin (D-MI), Rep. Thaddeus McCotter (R-MI), and numerous media outlets (including TPMDC).
It's true that the Treasury Department and Federal Reserve asked Robert Willumstad to resign after three months in AIG's top spot, and that Fannie and Freddie's CEOs were also asked to resign last year.
Here's where those cases diverge from GM: the government controlled the majority of AIG when it ousted Willumstad and had already placed Fannie and Freddie directly into conservatorship when it booted their CEOs. The government also has become a leading shareholder at Bank of America and Citigroup, while taking the discrete step of lending money to GM ... while planning on showing the door to upwards of half of GM's board in the coming days.
None of this is intended to take a side in the double-standard debate that TPM readers have dismissed as a false equivalency -- merely to observe that it would be equally false to compare the circumstances behind Wagoner's resignation to those behind the AIG and Fannie-Freddie departures.
Josh
Matt
Eric
Brian
I don't understand the headline. Do you mean "Did GM concede more than we know about", or did GM concede more than AIG, Fannie and Freddie?
And is it possible that this might be a temporary double standard (if you accept that this is a double standard in the first place...) that is serving as a very loud and public warning to the "too big to fail" financial entities?
Wasn't the auto industry "too big to fail", just a short time ago?
March 30, 2009 5:07 PM | Reply | Permalink
1. Your whole point is that while the government ostensibly owned AIG and had taken Fannie and Freddie into receivership that they are only "lending"money to GM? Really?
2. Why should the CEO of Bank Of America be fired? In what way was he responsible for the financial crisis? You just throw that in as if it is self-evident. In what ways are BoA and GM similar?
3. Does it bother you in the least that the real issue here is the dysfunctional relationship between the shareholders of private companies and their managers? Rick Wagoner was CEO of GM for almost a decade, and for some reason he was able to stay in charge as the share price steadily declined. Plus, he apparently has a hand-picked successor.
4. Just for the sake of irony, I note that Wagoner comes out of the Finance part of GM
March 30, 2009 5:25 PM | Reply | Permalink
I think we can blame Delaware for state of things as regards #3 in your comment. Shareholder derivative suits are notoriously difficult to win, even though corporations are supposed to function for the good of the shareholder.
In this day and age of multi-national corporations, perhaps it is time to eliminate the state-by-state legislation of corporate law. Then again, there is no way in hell of fundamentally changing THAT system short of revolution (i.e. that is where the power and money lies in this country, tin-foil hattery aside).
However, the effects of such a change (perhaps making a duty of corporate responsibility to the government/people, etc) would go a long ways to improving the current dynamic between the People, their Government and big capital.
March 30, 2009 5:30 PM | Reply | Permalink
I concur with CT. The title doesn't seem to comport to the subject matter, except in regards to the link in the third paragraph.
I do have to note; I don't think a double standard necessarily exists, because one other option for characterizing the relief of Wagoner is that this is a change in the approach by the Obama administration. In this regard, if more money is pumped into Citi, BoA, etc., this theory would posit the CEOs of those companies would be on the outs as well.
Or else, the comparison is apples to oranges.
Bottom Line: As far as the policy itself goes, as an old Army guy, I appreciate the setting of a firm deadline. This is much more pro-activity then could have been expected in previous years. The only downside I see is more pain inflicted unjustifiably on labor. Haven't they sacrificed enough?
I know this is long, but one more off-topic point on the Ayn Rand fetish out there in Wingnuttia. I'm pretty sure any honest reading of that book would inculpate the banksters, failed leadership at GM, and other give-away to corporations types in Congress as the looters John Galt was fighting. But, then again, we are all blinded by our biases.
March 30, 2009 5:25 PM | Reply | Permalink
Where is Leihmann Brothers? Wachovia? Merrill Lynch? Bear Stearns?
All gone. Don't tell me that the government only supports the financial industry and not the auto industry.
All those dinosaur financial companies aren't there any more.
The question on whether or not there is a double standard will more likely be answered after the Stress Tests on the banks are completely. If the CEO's of the banks that are insolvent are still there and those banks are not restructured than ABSOLUTELY there is a double standard.
But for now, I say wait and see. I am hoping that the backlash from the "double standard" will push the White House to get tough with the banking industry as well.
March 30, 2009 6:01 PM | Reply | Permalink
Not very surprised to see Daily Kos jumping to defend Obama from critiques by workers and the left. Defending the Centrist gates for the Obama adminsitration appears to be where they are.
March 30, 2009 6:52 PM | Reply | Permalink
It seems to me the forced resignation of Mr. Wagoner is mostly symbolic. There is not doubt in my mind that GM is and was a mismanaged company for ages, and I shed no tears at the man's removal. But as it is symbolic in tone and gesture, so too is the impact on my sense of justice with regard to the white-shoe establishment of Wall Street. I don't think there is any doubt the Obama Administration is playing footsie with the banks and it is because they are simply too close to them to be objective. I agree calling for resignation of many bank "leaders" is deserved and they too have been mismanaged for years. This blather about stress-testing banks and giving them more time is a joke. Stress-testing is an economic modeling technique without agreed upon standards among experts. It isn't a test at all.
March 30, 2009 7:32 PM | Reply | Permalink
If you are going to change the culture of an organization, you try to convince the core individuals who identify with and maintain the culture to change. The usual reason is for that is a major change in the organization's environment.
For a business, the environment it the customers (and competitors), suppliers and labor pool. The American auto industry has been in an adverse environment since the 1960's and the only changes GM has made have been those forced on them.
The next step is to replace the management, starting at the very top. That both breaks up the group of those maintaining the organization culture by getting rid of the central individual maintaining the old culture, and it provides a strong signal to every individual inside the organization what new requirements are going to lead to career success. At the very least, it tells them that the old ways are gone.
GM was not just maintaining the Detroit auto culture. GM created much of it and was its biggest practitioner. For GM to survive, that old culture must die.
The timing suggests that Obama gave the GM managers the chance to show that they "got it." They submitted their plan, and it continued to support and maintain the old culture.
It was time for the CEO to go.
The banks are a different game. They have been changing rapidly for the last two decades at the very least. Besides that, the government has changed the CEO's of AIG, Fanny Mae, Sally May, and some others. These are pretty powerful symbolic actions. Banks are a lot more responsive to their external environment than very large integrated manufacturing companies are. The rational prescriptions for the banks has to be different than for GM and its ilk, simply because of the very nature of the different businesses.
In both cases, though, changing the culture will take a while to get down into the organizations. The recent disgruntled AIG exec is an example. Some of the current employees will never adapt, because they KNOW that the way things were before is the best way, and any change is for the worse. That's the same essential reason why so many old people think the world is going to Hell in a hand basket since they were young.
We will hear a lot of news stories about disgruntled employees who think all the new changes are total crap. Plan on that. I'm sure the reporters or their assignment editors already have. That's going to be safe, cheap and certain filler to occupy the news hole when there is no exciting news story breaking.
I'm frankly surprised that the people surrounding Obama seem aware of these kinds of distinctions. Obama and his people are not normal politicians. They think too much and stay quiet too much -- thank God. We need more of this kind of leader.
March 30, 2009 11:29 PM | Reply | Permalink