The big news today is the White House decision that General Motors and Chrysler's viability plans didn't cut the mustard; now Chrysler has 30 days to sell itself to Fiat and GM has 60 days to aggressively restructure. Otherwise, it seems, a limited bankruptcy is in their futures. Jon Cohn offers some analysis.
But the real excitement surrounds the news that GM CEO Rick Wagoner has been ousted by the president. This is akin to focusing on the AIG bonuses amid the much more important and expensive bailout as a whole; while seeing a CEO get whacked is sure fun, and no doubt politically good for the president, it's the financing and mechanics of the restructuring that should be getting more attention. Josh Marshall ties the focus on the CEO back to the leadership at major banks:
All that said, though, after that meeting of the major bank CEOs at the White House last week, it's hard for me not to think that, for all that has happened, their clout in Washington is just on a scale where they are accepted as peers of the realm. And simply immune to certain sorts of treatment.
While these bankers do have political power, it's a little paranoid to call them "peers of the realm." As Josh observes, there has been turnover at the top of some of the major banks in the wake of the financial crisis, and likely more to come. But it's not a problem of political clout that allows bankers to be more insulated from political pressure; it's a problem of knowledge. Though the auto industry has a lot of problems that will be difficult to solve, those problems are easier to understand and chart, because at the end of the day, manufacturing is comprehensible industry. Meanwhile, the banks aren't making anything but bets, and they're making insanely complicated bets that are not clearly understood. The White House will avoid taking any aggressive actions until they're ready to own the consequences of those actions; that's half the reason they haven't moved toward nationalization yet. The administration clearly feels ready to handle any fallout from their strategy to deal with automakers. But until the stress tests are complete and more is understood about the nature of the underlying problems in the banks -- for instance, when the solvency vs. liquidity debate is resolved -- then the administration is much more likely to make bolder moves.
-- Tim Fernholz
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