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SCHIEFFER: Well, let me take, for example, two of the people your hear a lot about, and one is Citibank and the other is — is Bank of America.
Should the CEOs of those institutions be worried that they may face the same fate as Rick Wagoner did if their performance does not improve?
GEITHNER: Bob, what I’ll say is this. When, in the future — or I’ll just say, if, in the future, banks need exceptional assistance in order to get through this, then we’ll make sure that assistance comes with conditions, not just to protect the tax payer but to make sure this is the kind of restructuring necessary for them to emerge stronger.
And where that requires a change of management of the board, we’ll do that.
19 Comments on “Bailout Watch 484: Geithner: Wagoner Firing is The Exception That Proves The Rule...”
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The government selecting who runs a business….
Does the Soviet Union ring a bell here!!!
This is rapidly becoming a bunch of “not good”
oldyak,
Government assistance is optional.
Boards and executives should realize their jobs are at risk if they decide to take taxpayer dollars.
Management changes happen all the time in the world of private equity. Why shouldn’t the government have similar management input when taxpayer dollars are on the line?
-ted
BO ignored the rule of stray cats. Feed it, own it.
“Management changes happen all the time in the world of private equity. Why shouldn’t the government have similar management input when taxpayer dollars are on the line?”
Because it’s not input for the sake of running a better business, it’s grandstanding for Joe Sixpack.
Welcome to the Peoples republik of America!
GEITHNER: Bob, what I’ll say is this. When, in the future — or I’ll just say, if, in the future, banks need exceptional assistance in order to get through this, then we’ll make sure that assistance comes with conditions,
Heh, little late there buddy.
…The government selecting who runs a business…
I am astounded at this attitude. If you extort tax money to cover your screw ups, then yes, as a tax payer I want a say. This is no different than if GM had found someone else dumb enough to “loan” then money.
The fact is, GM is a government owned company. GM did this to themselves when they went to Congress demanding our tax dollars. If you don’t want the government running your company, then grow some balls and either straighten up or file BK.
I’m glad Obama had the sense to do what had to be done, and what the GM BOD doesn’t have the courage to do. Wagoner had to go and only Obama had the courage to pull the trigger. When you are CEO and you run your company in to the ground, then getting fired is a job risk.
The plan that GM submitted last month as required was a f**king joke. More of the same BS, and no real plan at all. No wonder Wagoner got canned.
I’m pretty sure than Chrysler is going to be shut down. The GM debt holders, unions, and management don’t seem to get the game is up. Something has to give. Perhaps seeing Wagoner’s and Chrysler’s heads on a stake at the front door might shake them out whatever trance they are stuck in.
What is the problem? The US government, unfortunately, is now the biggest stakeholder in these enterprises. A position it took to keep the businesses from imploding in a chapter 7 sort of way. Now, one can argue whether a disorderly liquidation may have been a better route (and I think no one who actually understands the situation could honestly say that would have been better), but there is no question the government representatives should take responsibility to see the right people are in place.
Is anyone seriously arguing the moves to this point are wrong? Should Rick Wagoner and the members of the BOD that have been in charge of the ship still be in charge? As I recall, TTAC commentators were not praising the viability of the GM recovery plan.
Sadly, these comments look to be an unreasoning swipe at the new administration. So I’ll swipe at the old — Do you think GWB would have the guts to fire Wagoner and the BOD because they couldn’t deliver on the terms of the government loan (which GM asked for and the Bush administration delivered). “Heck of a job, Ricky” is more likely in my opinionated view.
Unfortunately the real world is complicated and simple answers rarely lead to acceptable outcomes. Does anyone here think the government analysis of the GM turnaround plan was fundamentally flawed? If so, please be specific. If you think Rick Wagoner and the BOD that enabled the last phase of the terminal decline of GM should still be running GM, speak up. I’d love to hear why.
derm81
You realize of course it was the Paulson plan that had no conditions on the banks, right? Geithner inherited that situation.
Changes in management are supposed to be done by the board of directors. The board of directors work for the owners of the company, which is the shareholders.
Even if the government is a majority shareholder, shareholders have the final say on who sits on the board, and a vote has to be taken.
Silly me, that is the old America. The new America is a broke, financially destitute government attempts to run broke, financially destitute business corporations.
What a complete farce, and a complete mess.
Changes in management are supposed to be done by the board of directors. The board of directors work for the owners of the company, which is the shareholders.
Even if the government is a majority shareholder, shareholders have the final say on who sits on the board, and a vote has to be taken.
This reminds me of the angry resignation letter written by the AIG employee who complained that he is entitled to his bonus because he didn’t work in the derivatives group.
Time for a wake up call. Had the government not intervened, GM would have already filed bankruptcy. Without DIP financing being available from the free market to fund a Chapter 11, that would have resulted in a Chapter 11 filing being converted to Chapter 7 liquidation.
That would mean there would be a receiver running the show, not a board of directors. The shareholders would be holding absolutely worthless stock, with priority at the very end of the line. Worthless stock, near-worthless bonds, worthless golden parachutes, everything back to zero or close to zero
The GMs shareholders are lucky to have anything at all. Ditto with the Board. To speak of their “rights” is pure folly. They have absolutely nothing to whine about because they have more today than they would have had Uncle Sam not thrown them a lifeline. Everything that they have as of now is because of the generosity of the taxpayer, and they should feel damn lucky to have it.
The government is intervening because it has little choice, given the circumstances. Removing Wagoner is not only appropriate, but it’s an essential step to recovering as much capital as possible. A private equity operator would have done it in a heartbeat. Removing bad management is always a top priority when a turnaround is being attempted.
Changes in management are supposed to be done by the board of directors. The board of directors work for the owners of the company, which is the shareholders.
Technically, Wagoner resigned. He was not fired by anyone. The White House said “Why don’t you resign?” and he did it.
“Government assistance is optional.
Boards and executives should realize their jobs are at risk if they decide to take taxpayer dollars.”
zerofoo, government assistance wasn’t optional for banks like Wells Fargo. All large banks were forced to participate in TARP in an attempt to hide which banks were in the worst shape. Now relatively healthy banks are complaining that they can’t return TARP money.
http://money.cnn.com/2009/03/27/news/economy/tarp_takeback/
http://finance.yahoo.com/tech-ticker/article/96281/The-Godfather-Paulson-Makes-Offer-Banks-Can't-Refuse?tickers=JPM,WFC,BAC,GS,MS,C,XLF
Nationalized Citibank Commercial Parody
http://bailout.uslaw.com/?p=503
@yankinwaoz:
“I’m glad Obama had the sense to do what had to be done, and what the GM BOD doesn’t have the courage to do.”
You do realize Obama has seen fit to throw billions at GM and Chrysler. That’s not courage.
BO was correct when he told these banker scumbags that his administration was the only thing standing between them and a mob with pitchforks. These bastards should be happy that they can slink away with their millions and not find themselves impaled on stakes . . . yet.
I keep getting confused. It is hard to keep track of which days we are supposed to be happy that Wagoner is gone and which days we are supposed to be outraged he was fired. Can we move to a simple schedule. I propose glee on Mondays, Wednesdays, and Fridays; and outrage on Tuesdays, Thursdays, and weekends.
Is anyone seriously arguing the moves to this point are wrong? Should Rick Wagoner and the members of the BOD that have been in charge of the ship still be in charge? As I recall, TTAC commentators were not praising the viability of the GM recovery plan.
In case not everyone’s noticed, here’s how “conservative” minds work:
money making or extorting business > bankrupt business > government.
All of this was a decent idea when the market was supposed to do it. Of course, we all saw how that turned out, so when the gov stepped in to do the same thing, it’s automatically demoted to bad idea.
If only the economy or the real world in general could be as predictable as ideologues.
yankinwaoz :
April 5th, 2009 at 10:51 pm
“Technically, Wagoner resigned. He was not fired by anyone. The White House said “Why don’t you resign?” and he did it.”
I imagine it was more like this:
R.W.: “Hi, glad to visit you again.”
Treasury: “Your plan stinks, you have to go.”
R.W.: “But I just got here, and it was a really long drive and I have a new plan.”
Treasury: “Not what we meant, and we don’t care. We are firing you.”
R.W.: “Isn’t that up to my board? And what if I don’t?”
Treasury: “No, we are your largest ober-super-senior-secured creditor, and either you quit, or we pull our money.”
R.W.: “Oh. Is Monday soon enough?” (That way, I can claim the mileage for the return trip on my expense report.)
If you go to a lender to borrow money, then you have to accept their conditions that come with the money. If you don’t want to accept their conditions, then find a different lender or don’t borrow the money. It is as simple as that.
GM and Chrysler don’t have to accept the government’s conditions. Of course, if they reject the government’s conditions, then they won’t get the billions in government support, and they’ll end up in bankruptcy.
It is not a surprise that the government would require management changes.