We have been dealing with so much big government heinousness being foisted upon us since January 2009 that the monstrosity that started it all remains largely unexamined – October 2008’s Troubled Asset Relief Program (TARP).
A $700 billion atrocity about which then-President George W. Bush bizarrely said “I've abandoned free market principles to save the free market system.”
To best size up what TARP put into practice looks like, let us consider automobile giant General Motors (GM) – a recipient of $49.9 billion in TARP coin – and see how they’ve been doing since.
It ain’t good. And it has nothing to do with saving the free market system – or GM.
One huge problem – and a crystalline visual aide of all that is wrong with TARP and government ownership - is GM Chief Executive Officer (CEO) and Chairman of the Board Dan Akerson.
Akerson is not – and never has been – a car guy. He himself said so. What is he? He is a DC-connected, Wall Street hedge fund big coin guy.
Akerson’s immediately preceding gig was Managing Director and head of Global Buyout for the incredibly inside-the-Beltway-connected Carlyle Group.
This hip-joined relationship with the federal Leviathan means Akerson’s a cardboard cutout for the real CEO of Government Motors – U.S. Treasury Secretary (and yet another fellow DC-Wall Streeter) Tim Geithner.
Which could mean very bad things for us taxpayer owners of Government Motors.
Hedge fund guys are very fond of taking massive risks in pursuit of short-term profits. And that’s fine - when they’re doing it with their funds.
But as CEO of GM, he’s rolling the dice with OUR funds. Not nearly as fine.
Running a car company requires LONG-term thinking. Determining the right cars to design, make and bring to market is chess, not checkers. You don’t plan quarter-to-quarter or even year-to-year – you plan YEARS out in advance.
So why do we have a Global Buyout private equity guy – the king of day-to-day decision making – running GM?
Because this is Government Motors. Which means political decisions trump automotive business ones. And there’s an election coming up.
So things must be made to look as good as possible in the short-term – no matter how phony it is nor how much damage it does long-term to GM.
You’re seeing myriad examples of this fake-it short-term policy from the company – and from its Washington, D.C. masters.
Begin with President Barack Obama’s chairman of the Council of Economic Advisers, Austin Goolsbee, announcing in late February that the government will seek to sell its GM shares as quickly as possible. Which – to no one’s surprise – caused a dip in GM’s share price.
Which currently sits - below its Initial Public Offering [IPO] price - at $33. For We the Taxpayers/Shareholders to break even, it has to get above $54.
Which ain’t happening anytime soon - putting the lie to all this talk of We the Taxpayers/Shareholders making money on TARP.
To try to artificially pump up short-term sales, GM has been repeatedly slashing car prices and handing out purchase discounts well above the industry average.
As we saw with another government car giveaway, Cash for Clunkers, this only moves up car purchases that would have been made anyway. Again – short-term vs. long-term.
Perhaps reading the tea leaves, Chris Liddell resigned last week as GM’s Chief Financial Officer to be replaced by - yet another DC-Wall Street nexus banker, Dan Ammann, formerly of Morgan Stanley.
Short-term vs. long-term.
But we can take some solace - in the fact the CEO Akerson has much experience with bankruptcies.
He was until May of 2008 Chairman of the Board of Hawaiian Telecom - the company declared bankruptcy just seven months after his departure. He was also the CEO of XO Communications when it went bankrupt in December 2002.
Akerson’s not a bankruptcy-homing device - he’s had his share of successes as well. But they were in telecommunications – not the auto industry.
So we taxpayer owners of GM are left with an uber-politically connected equity finance and telecom guy, with a self-declared ignorance of all things car - running our car company.
A bio-prop proxy for short-term politically-fixated Tim Geithner and President Obama - and the short-term profit-fixated DC-Wall Street nexus.
The very real risk is that GM will be strip mined for immediate fiscal and political advantage, leaving We the Taxpayers/Shareholders once again holding the long-term bankruptcy bag.
So for this Administration, Akerson’s the perfect choice to run Government Motors.
And Government Motors is the epitome of TARP in action.