“I believe that the power to make money is a gift from God.” -John D. Rockefeller
I ran into that quote this morning, on the Forbes website. Forbes seems to think it exemplifies wisdom.
Anyway, this morning President Obama announced a policy toward the automobile industry, GM and Chrysler in particular, that lays out what the administration thinks needs to be done to put the automobile industry back on its own four wheels without subsidizing it forever and ever. Alex Koppelman has a succinct explanation of the policy.
Also at Salon, Andrew Leonard asks the question on many minds — Why so hard on the Rust Belt, and so easy on Wall Street?
Treasury Secretary Tim Geithner’s plan to create a market price for toxic assets has been widely lambasted as a scheme to paper over banking sector insolvency. If Obama can force Wagoner to resign, based on his record, then why haven’t Citigroup’s Vikram Pandit and Bank of America’s Ken Lewis been forced to step down? If the White House can declare that G.M.’s bond-holders must accept they will not be repaid in full what they are owed, then why aren’t Citigroup and Bank of America’s debt-holders being told the same thing?
Leonard cites Simon Johnson’s article “The Quiet Coup” at The Atlantic, which argues there’s a long pattern of nations being unwilling to squeeze the financial sector hard enough to correct crises such as ours. The Obama Administration appears to be falling into this pattern. The financial team has excessively close ties to Wall Street. Obama policies are crafted to prop up failing executives, not resolve the financial crisis.
However, Leonard continues,
But it is not the only possible explanation. There are a few brave, or perhaps foolhardy, analysts who are willing to argue that the administration’s approach to the banking sector could actually be preparation for the ultimate endgame of nationalization or government-expedited bankruptcy restructuring, rather than the free pass to the banks it currently appears to be.
In this scenario the ongoing stress tests, in conjunction with the price discovery mechanism for toxic mortgage-backed securities that is at the heart of of the Geithner plan to fix banking balance sheets, will reveal once and for all which banks are truly insolvent and cannot survive in their current form. Having established that beyond a doubt — much as the government’s analysis of G.M. and Chrysler’s situation has established pretty conclusively that they cannot continue as currently structured — there will be no other alternative than a government takeover.