"Anatomy of a Meltdown" in the recent edition of The New Yorker ((Dec 1, 2008) begins, "Some are born radical. Some are made radical. And some have radicalism thrust upon them." The article probes the federal response to the financial crisis, through which formerly free market acolytes in the Treasury Department and Federal Reserve responded with the most sweeping federal intervention in US economic history. It occurs that the point about radicalism is largely missed.
What is truly radical is the idea that government, itself, is the problem. The Reagan Revolution laid the foundation of the idea, that blossomed with the Republican Reformation through the 1994 Congressional mid-term elections. It reached full bloom with ascendant Bush political fortunes in Tallahassee in 1998 and in Washington, DC, in the November 2000 election.
Then Florida Governor Jeb Bush articulated the cause in his 2003 inauguration address when he said: “There will be no greater tribute to our maturity as a society than if we can make these buildings around us empty of workers; as silent monuments to the time when government played a larger role than it deserved or could adequately fill.”
The workers he meant to get rid of-- the meaning was clear to the invited audience-- were regulators. And, mainly, regulators charged with roadblocks to economic growth. The Bush assault against environmental regulations represented the high water mark for a Forty Year War; exhausting itself not through any act of environmentalism but because of the economic crisis. Still, the war is visible most clearly in places like South Florida where the trampling of rules and intimidation of regulators goes on throughout local government without criticism or penalty.
Today General Motors Corp.’s board is meeting in Detroit to discuss a rescue plan to present to Congress that may determine, according to Bloomberg News, "if Chief Executive Officer Rick Wagoner can save the company and keep his job." I wonder why the board of directors of GM should keep their jobs.
Among GM's board of directors is Miami's Armando Codina, who brought Jeb Bush into the real estate industry where he made his fortune and one of George W. Bush's strongest supporters. Codina joined the GM board in 2002. According to the GM website, Codina is also a board director of Merrill Lynch.
The fall of GM has its roots in a business model that none criticized beyond environmentalists who pleaded with Congress and the states to stop selling cars and trucks by the pound of metal; the more pounds, the more profit.
More suburbs, more cars. More cars by the pound, more environmental destruction. What these easy-to-grasp formulas fail to capture is how fiscal stewardship of the largest publicly owned corporations used "government is the problem" to spurn protections of the environment while encouraging credit based on unregulated, toxic debt and derivatives; the undoing of Merrill Lynch.
Today, the Wall Street Journal speculates on whether Rick Wagoner, GM chief, will be able to keep his job. It focuses on the legacy cost of pensions, healthcare, executive compensation and union agreements hammered out in times when even union leaders could ignore the peril of financial gerrymandering. If taxpayers bail out GM, its board of directors should be asked to leave by Congress, as should the boards of any publicly held corporations that receive the blessing of taxpayer bailouts from free market economic ministers now turned radical government interventionists.
General Motors
MARKET CAP HAS DECLINED:
1954 - 1973 GM was ranked Number 1
1985 - 1999 GM was ranked Number 1
2003 - GM ranked Number 61
2004 - Ranked #173
Sept 23, 2008-- Junk bond status. Fitch, the credit ratings agency, said it reduced GM's issuer default rating one notch to "CCC" from "B-." Both ratings are noninvestment, or junk, grade.
November 20: CNN, "General Motors has a market capitalization of less than $2 billion. The stock, which now trades for a little under $3 a share, hit a 70-year low of $1.70 on Thursday morning before recovering a bit. Normally, when a blue-chip company sinks to such depths of despair, it gets tossed from the S&P 500. But not only is GM still a member of that index, it remains a component of the granddaddy of market barometers: the venerable Dow Jones Industrial average. Why? Or in the words of mid-'90s self-help guru Susan Powter, "Stop the insanity!" The editors of The Wall Street Journal and Dow Jones Indexes, who decide who's in and who's out of the Dow, soon have to come to grips with reality and remove GM from the DJIA."
And so, too, the directors should be removed from their stewardship of a fallen giant.
3 comments:
I too believe the boards should be removed as well of the CEO's of these corporations. The american car companies should have been following the lead of Toyota and Honda: Making Greener, compact cars. They have watched these car makers dominate the market for 25 years, did they not see that? The gas crisis of the early 70's showed us that gasoline ran the car market. Bigger cars and SUV's should never have taken hold. It was greedy marketing that resulted in their popularity.
Who was the one who first marketed the Hummer? That person should be raked over the coals.
The Hummer was a spin-off from the first Gulf War. Someone thought to capitalize on the chest-thumping that the press did around the "new jeep of the Army." GM bought the company that originally catered to rich people who wanted to "play army" like Governor Terminator and turned a quirky truck into a bloated Suburban for the everymom.
The irony is that the demise of the big three was sown when they got the California Air Resources Board (CARB) to back off the zero emission mandate. The Japanese car companies were in serious catch-up mode trying to make the electric car mandate. The product of their feverish work was the hybrid drive engine. So all that effort undermining California's Clean Air Board and Federal CAFE backfired when people figured out that gas wouldn't be a buck a gallon forever and SUVs became the icon of wastefullness.
The big three liked to always parrot the phrase "we build what the market demands" as a way to deflect any fuel efficiency improvements. So now the market has spoken quite loudly and now they want a bail-out. I'd be more sympathetic because of all the good blue-collar jobs attached to the auto industry if the Unions weren't such toadies for the executives for so long. The Unions did as much to hold down fuel efficiency standards by lobbying alongside the corporates about how it would "destroy jobs."
If you really want to reinvent the auto industry, use that "retooling" money to spin off chunks of each of the majors to small start-ups like Tesla motors.
be happy and love. kiss
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