GM’s fired CEO Rick Wagoner deserves no defense and few will offer one. Nevertheless, the notion that the administration is now calling the shots on everything from employee compensation to CEO terminations is a sobering one. As this report notes:

The Obama administration used the threat of withholding more bailout money to force out General Motors Corp. Chief Executive Rick Wagoner, marking one of the most dramatic government interventions in private industry since the economic crisis began last year.

In wrestling with the economic crisis, the government has demanded the ouster of the head of American International Group Inc., but only as it took a majority shareholder position. In this case, the administration has ousted a major CEO as part of an ongoing restructuring.

The move also indicates that the Treasury Department intends to wade more deeply than most observers expected into the affairs of the country’s largest and oldest car company.

There are a few noteworthy points (in addition to the observation that “private industry” is a quaint but increasingly out-of-date term to describe the supplicants who have come to the government for assistance).

First, the government and car companies made a fuss over the unacceptability of bankruptcy. The company couldn’t possibly file for bankruptcy because consumers would lose faith in the viability of the companies and stop buying cars. But what is this process — cutting bond holders, struggling to pare back union obligations, and decapitating management other than a quasi-bankruptcy (with administration political appointees in the place of impartial judges)?

Second, this is what executives should expect once they come hat-in-hand to the government. They may lose their independence — and ultimately their jobs. At least this administration intends to run the companies it seizes, at great expense to the taxpayers and with multiple and conflicting objectives (e.g., protect unions, create clean cars, make the business profitable). Executives and their shareholders should be forewarned.

Finally, if the government is seeking to substantially downsize these companies (supposedly reducing their workforce as well) why are the taxpayers spending tens of billions of dollars? It is hard to fathom the rationale for spending that sort of money on firms which will  employ fewer and fewer employees and be a smaller and smaller contributor to the overall economy. Really, we could have given each employee a $100,000 in severance and be done with it.