Obama: What, Me Meddle?

On page 188 of Jon Alter's mostly laudatory Obama instant history--which, oddly, has become more useful now that everyone's searching for clues to Obama's decline--you hit this passage:

But whatever happened to the American auto companies, the United States would have a new approach to troubled industries--a moderate, commonsense view, not the hands-off philosophy of conservatives or the heavily planned industrial policy of the left. Obama envisioned no fundamental shift in the role of government in business, and he believed that those who accused him of a power grab either weren't listening to him or were intent on distorting his views.

Alter doesn't challenge Obama's belief. But six pages earlier, he presents powerful evidence that more or less proves Obama wrong. On page 182, Alter has just finished defending the decision to use a prepackaged bankruptcy as the means to rescue Chrysler and GM. Then comes this:

While he had his foot on their necks, Obama moved aggressively in late spring to force the auto companies to adopt fuel economy standards (35.5 miles per gallon by 2016, up from 27.5) that they had loudly resisted for decades. Because he considered reducing dependence on foreign oil to be a national security issue, Obama made an exception to his promise not to use his leverage to tell Detroit how to build cars.

An exception. Well, all right then! Did Obama tell us he was making this exception at the time? I don't remember it (which is why Politico had to resort to quoting anonymous lobbyists suggesting that GM succumbed to environmentalist pressure from its new majority shareholder). Has Obama acknowledged that continuing government ownership of a third of GM will give him leverage in future auto debates--which, at least if they affect energy use, will also be "national security" issues?

We also know (from Reuters) that GM's then-CEO Fritz Henderson's

plan to move GM headquarters from the Renaissance Center to nearby Warren, MI, was scuttled by the White House auto task force.

Another exception! National security seemingly wasn't involved this time, and (according to Alter) Obama himself had pledged that this was a matter for GM, not the government, to decide. But Michigan's congressional delegation objected to the move out of downtown Detroit.

Obama's Treasury Department was also upset, apparently, when GM CEO Ed Whitacre bought lender AmeriCredit without giving the government much advance notice. (Here the problem was apparently that the acquisition might hurt another lender the government already owned.)

If you think some firms really are "too big to fail," then at least some degree of unseemly state-corporate comingling and influencing seems inevitable when they do fail (and need bailing). According to Alter, Obama recognized that this was uncharted territory and tasked subordinates with drawing up some "rules of the road" to govern these situations. The result was a report written by Lawrence Summers's deputy Diana Farrell, arguing (in Alter's words) that "when new management is in place, the government's role would be hands-off." The trouble is that Obama announced this rule, but then his government made "reluctant" exceptions pretty much whenever it felt strongly enough. Then the exceptions were covered up.

And then Obama complained the Tea Partiers who worry about government control didn't listen to him? Maybe that's because they suspected, rightly, that what he said he was doing and what his government actually was doing weren't the same thing. He won't meddle except when he will.  But, don't worry,  it will be kept secret! It's enough to make even a non-paranoid anti-corporatist wonder where it all ends--what else is going on behind the scenes that we don't yet know about?

If Obama was going to break his "hands off" rule and give in to the temptation of government control, it might have helped tamp down Tea Party paranoia if he'd publicly announced those exceptions and explained them, no? One of the "rules of the road," you'd think, should be official awareness that when the government owns 60 percent of a company, citizens will be suspicious about how it uses its power and might not be satisfied with righteous general assertions of purity. Extraordinary transparency would seem to be in order (not just Steve Rattner leaking).

P.S.: The most common "symbol of Obama's overreaching," the firing of GM CEO Rick Wagoner, probably shouldn't have been controversial. If you were writing "rules of the road" to govern the bailing out of "too big to fail" firms, surely one rule would be: if a "too big to fail firm" actually fails and has to seek a bailout, the CEO must lose his job. Otherwise, where's the penalty that would serve as a deterrence to others (a penalty normally provided by a bankruptcy court)? Even sacking the CEO is probably insufficient deterrence--he's only one guy. How about a "clawback" rule requiring all the failed firm's top executives to give up some substantial portion of their pay and bonuses for the previous year or two?

Sure, good executives will be hurt by these rules--but that unfairness is outweighed by the need for long-term deterrence. Plus, even arbitrary rules will be rules, acknowledged and accepted before the game is played.

Given the inability of Obama to stick by even his own rule, it might be best if they were written into a statute. ... 7:55 p.m.

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