It is taking some time for the management of financial institutions to realize what they have done by “accepting” (in some case being bludgeoned into receiving) government assistance. The Washington Post reports:
The administration’s display of authority sent U.S. stocks tumbling and raised questions about whether the government would take similar steps against top executives at U.S. banks that are also receiving government bailout funds.
[. . .]
The administration’s decision to oust G. Richard Wagoner Jr. sharply ratchets up its control over companies receiving government assistance in the face of criticism about a lack of accountability over billions of taxpayer dollars. The government demanded Wagoner’s departure even though it does not own a stake in the automaker. The three companies the government does control — American International Group, Freddie Mac and Fannie Mae — were required to replace their chief executives. The government has not, however, required any banks in which it took smaller stakes to replace its top executives. It did pressure Citigroup to replace several members of its board of directors.
And some of those executives at financial institutions are now fretting. The government can set salaries, rip up contracts, force out management, determine business plans, use threats of exposure (your bonus or your name?) from the bully pulpit to boss you around. Oh, and if you think the decisions will be made “on the merits” think again — or have a talk with Reps. Barney Frank or Maxine Waters.
In place of bankruptcy courts we have a creepy form of corporate socialism, where taxpayers fund the bill and carry the risk. (Victor Davis Hanson observes that at least rhetorically it is “first person socialism.”) In the Brave New World of Obamaism decisions are made by political appointees — or even worse, by committees of political appointees. No wonder the banks want to give back the TARP money. But that won’t save them now. No, the Obama team is on a roll and intends to exercise new powers even over firms it hasn’t yet funded.
Today GM, tomorrow Bank of America. Those bank execs have good reason to worry.
