Over the weekend the Obama Administration effectively fired the CEO of GM, Rick Wagoner, and much of the GM board. This would not be much to report had the common stockholders of GM voted to replace members of the board and those new members then voted to terminate Mr. Wagoner; it would actually be almost expected and applauded by most. However, this story becomes very newsworthy as it is the first time that the United States Government, namely the Obama Administration, has effectively fired a member of the private sector.
Due to TARP, the United States Government owns a large share of a number of major U.S. corporations, a gigantic leap in the direction of Socialism. However, until recently the Government has led us (the citizens) to believe that it would not meddle in the affairs of these private organizations, but rather it would simply be a silent investor in them in some horrible attempt to calm the economic volatility. The Government’s stance as a silent investor, however, has rapidly eroded and developed into the role of an activist investor that even Carl Icahn would envy. The United States Government has capped executive income ($500k per annum), capped executive bonuses (1/3 of annual salary or $167k), is attempting to tax any bonus paid to a family earning more than $250k per annum at a 90% rate, restricted the marketing practices of a number of companies (most notably not allowing Bank of America to sponsor the new Yankees Stadium), and now deciding who should is worthy or unworthy to be a CEO or board member of private companies.
The members of Congress and the Obama Administration seem to believe that they are more fit to run private companies than anyone else in this nation. A few months ago we were led to believe that we must bailout the domestic automobile manufacturers in order for them to avoid bankruptcy (see my article on this topic). The Government, in all its wisdom, has now decided that the only way out for these very companies to restructure and survive is to go the route of bankruptcy — this only after handing them billions upon billions of dollars in tax payer cash!
We are on a collision course with socialism at an incredible rate. I’d usually offer a relatively simple solution here, but given the above absurdities offered to us by our Government, I think that the solution is more than apparent.
It should be noted that President Obama has explicitly given GM sixty days to completely restructure and Chrysler thirty days or both firms will be forced into bankruptcy by the United States Government. Obama has demanded, as an activist investor/chairman of the board might, that Chrysler merge with European automobile manufacturer, Fiat, within the next thirty days. In addition, the Obama Administration is now insisting that members of the United Auto Workers Union give bigger concessions than they had previously been willing to give and that holders of GM debt agree to take a steep discount on that debt and could be required to convert it to GM stock.
Again, this would be fine and well if a private equity group purchased a good chunk of one of these companies then demanded changes be made – it is the legal way of doing things in this nation. However, in this circumstance we have the Federal Government not only intervening in the private markets, but completely controlling them. President Obama commandeered complete control of General Motors and Chrysler and that should not sit well with the American people. What happened to our guarantee of Life, Liberty, and the Pursuit of Happiness?