Who’s In Charge?
I seem to recall that, in his last press conference, President Obama said the government was not going to run auto companies. I guess I must have misunderstood what was said, because here is what BusinessWeek writer David Welch said in a recent article.
“Make no mistake: The Whitehouse and the task force overseeing the restructuring of both GM and Chrysler since February are calling the shots.”
You can take a look at Welch’s complete article here, but I will point out a few interesting highlights from his article in the following.
“Treasury has a couple dozen staffers and executives from Boston Consulting Group (BCG) scrutinizing operational details at the car company. (BCG is getting paid $7 million from the government for its work on both GM and Chrysler.)”
“Some GM insiders fret that Treasury’s key players have precious little industry experience.”
The head of the Treasury Task Force is Steven Rattner, the Wall Street financier and co-founder and Managing Principal of the investment firm, Quadrangle Group. (Yes, this is the same Rattner who is being investigated for his alleged connection to a scandal involving a New York State retirement fund.) No one on the Treasury Task Force has any experience in the car industry.
Welch also reported that a dozen Treasury staffers and outside consultants recently descended on GM, and pushed them to dump Buick and GMC, in addition to Pontiac, Hummer, Saab, and Saturn. The staffers said that Toyota was successful with just two brands—Toyota and Lexus—why couldn’t GM just sell Chevrolet and Cadillac? After GM pointed out that Buick and GMC were moneymakers, and that Buick was in high demand in China…Treasury relented.
Treasury and BCG were not finished, however. The staffers and consultants made GM managers jaws drop when they questioned why GM was spending money to continue development of the Volt. Apparently, Treasury thinks the current lineup of gas-guzzling Chevrolets and Cadillacs is just fine.
Not to be outdone by staffers, one Treasury Official wanted to know when the new Chevy Malibu would go on sale. It has been in showrooms for 18 months.
I’ll bet Ford is glad they didn’t take any bailout money from the government.
Gee, I can hardly wait for these folks to take over my health care.
Confusion in Lending
I think it is safe to say that anytime the government gets involved in anything to do with business–confusion reigns supreme. The President made it clear in one of his recent addresses (review here) that he wanted banks to start lending, especially to small businesses.
However, yesterday, I read a column from the Associated Press that covered Congressional hearings on the conflict and confusion being experienced by banks. Here are some summarized excerpts from the article:
Regulators at a House hearing Wednesday heard complaints from small business owners, and others, who haven’t missed any payments, but are getting their credit lines deeply cut or yanked away… “There is actually a growing anger from these people,” said Rep Spencer Bachus of Alabama”… “The reduction or denial of credit to credit-worthy customers is occurring every day across America in about every town,” he said.
“The current bank regulatory climate is causing many community banks to unnecessarily restrict their lending activities,” said Michael Menzies, Chairman of the Independent Community Bankers or America. “Actions of bank field examiners are often unnecessarily putting constraints on community bank lending,” he said.
“Banks have to lend money to make money,” Timothy Long, senior deputy comptroller in the Office of the Comptroller of the Currency, told the hearing…Scott Polakoff, acting director of the Office of Thrift Supervision, said “…there is an element of truth in the bankers complaints [that examiners have been ordered to ‘crack down'].”
Bank examiners work for the Federal Deposit Insurance Corporation and the Treasury Department. Don’t tell me this is another boondoggle by Tim Geithner!
Will the political drama never end, so businesses can all get back to work and bring our economy back on track?
My Book
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