"Wagoner Heads Out, As Banking Executives Stay Put"
This comes one day after General Motors CEO Rick Wagoner resigned at the White House’s request. As the Washington Post reported, “the administration effectively rejected as untenable the business plans that GM and Chrysler had submitted to restructure their companies,”a failure for which Wagoner was the casualty.
Wagoner’s ouster does bring up an interesting question, though: why is the administration okay with dismissing the head of an auto company, while going to great lengths not to get involved with personnel decisions at federally bailed-out financial institutions (aside from AIG)? As Rep. Thaddeus McCotter (R-MI) put it, “when will the Wall Street CEOs receiving [bailout] funds summon the honor to resign? Will this White House ever bother to raise the issue? I doubt it.”
There does seem to be a bit of a double standard when it comes to the respective rescues of the financial system and the auto industry, even beyond management decisions. Ali Frick at ThinkProgress noted that during the AIG bonus debacle, AIG’s contracts were considered sacrosanct, while United Auto Workers has repeatedly agreed to “make major concessions in its contracts,” in an attempt to make the auto companies viable.
So what’s the difference? Tim Fernholz posited that “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 a comprehensible industry. Meanwhile, the banks aren’t making anything but bets, and they’re making insanely complicated bets that are not clearly understood.
Fernholz added that he believes that “the administration is much more likely to make bolder moves” once the banks’ stress tests are complete. And maybe this will be true, if the stress tests confirm that the banks are in far worse shape than previously thought.
But that doesn’t change the fact that the government has expected the auto companies to profoundly change the way in which they do business, while not asking for the same level of change from the financial giants. Even within AIG, executives called the Credit Risk Committee, who “oversaw some of the company’s biggest bets,” are still plying their trade.
So as Paul Kedrosky put it, if you want to make catastrophic mistakes and keep your job, “you need to do it in a place where your errors nearly take down global capitalism.” Otherwise, “keep your resume up-to-date.”