Feb 17 2009
Crash and burn here we come
President of Everything
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| “This is a presidency on steroids.” That’s not an assessment from a libertarian shocked by President Barack Obama’s first month in office. That is the first sentence of Eugene Robinson’s latest column, which goes on to list many of the ways that the Obama Administration is “managing the big chunks of the private-sector economy that are now more accurately described as semi-private at best…. He may have to become an auto executive, a banker, mortgage broker and who knows what else before this crisis is done.” Who knows what else, indeed.
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This past weekend the Obama Administration backed off previous plans to appoint a ‘car czar’, instead opting for a “The Presidential Task Force on Autos” headed by Treasury Secretary Timothy Geithner and National Economic Council chair Lawrence Summers. Robinson sees this as a positive step, writing: “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.” We’re not laughing. And neither are auto industry analysts who Politico reports charge that: ” the panel is short on experience specific to the auto industry, made up of nine federal agencies and, so far, only one outside expert in [Ron] Bloom.” “You have basically entrenched bureaucrats trying to solve a business reorganization of the utmost complexity, and I just don’t see how it is going to work,” Automotive Consulting Group president Dennis Virag told Politico.But worse than the lack of day-to-day business experience are the political pressures a government run auto industry will be beholden to. Already the Obama Administration is dictating what types of cars the auto giants can build, and the bailout money they are receiving could very well start a trade war. And as the Los Angeles Times reports: “Not only does Obama need to worry about the effect of major auto industry bankruptcies just as he hopes the stimulus package will start to work, but he has strong political concerns. Union workers were major supporters of Obama’s campaign and states with U.S. auto assembly plants such as Michigan and Ohio were crucial to his victory.”Political pressures are also hurting the Obama Administration’s management of the financial sector. Sen. Chris Dodd (D-CT) inserted a salary cap provision into the stimulus bill that will make it harder for financial firms to fire failing leadership and hire new leadership. The Obama Administration did not want the provisions in the bill, but lawyers say there is little wiggle room around the populist measures. And the pay cap provisions do not hurt just the big institutions, but hamstring small local banks as well. Finally, the Obama Administration is considering unprecedented interference in the mortgage industry by allowing bankruptcy judges to rewrite mortgage contracts. These modifications would undermine home ownership, drive up the cost of new home loans, and prevent few foreclosures.Columbia Business School professor Amar Bhide writes in the
Wall Street Journal: “Americans are unusually idealistic and optimistic. We believe that we can all get ahead through innovations because the game isn’t stacked in favor of the powerful. … To sustain these beliefs, Americans must see their government play the role of an even-handed referee rather than be a dispenser of rewards or even a judge of economic merit or contribution.” But this is not what we are getting from the Obama Administration. Millions of dollars are being minted by lobbying firms in DC cashing in on connections to the current regime. Not only has the Obama Administration signed over a dozen waivers bringing lobbyists into their administration, but Obama campaign operatives are also fetching high salaries on K Street. No wonder the markets have reacted negatively to the new administration’s recovery plans. QUICK HITS
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