Apologia at G-20, No Car Guys, but a Rally

by Steven M. Cohen  •  Apr 4, 2009 at 9:30 am

http://www.buyselljump.com/2009/04/apologia-at-g-20-no-car-guys-but-a-rally

President Obama made an unintentionally clever pun while in Europe for the G-20 meeting, telling his fellow leaders that the U.S. had some "accounting" to do for the global financial mess. Mr. Obama might do well to concentrate on his own accounting, specifically how any of his ambitious social-engineering projects will be funded short of squeezing every last dollar out of every last taxpayer, and even then running the metaphorical currency printing presses at full tilt. His "accounting" comment, of course, referred to our nation owning up to its considerable culpability in pushing the world to the economic precipice, at least according to the president. Imagine, a U.S. president stopping just short of abjectly apologizing for the country's financial excesses, the root cause of the economic havoc around the globe, a worldwide financial virus that we inflicted on a host of countries that were merely innocent bystanders. What a contrast to that out-of-control cowboy who never apologized for anything, even though he was responsible for everything. The G-20 attendees, especially the Europeans, ate it up.

You might call this Obama's we-a culpa. He seemed to enjoy his role as America's apologist-in-chief. It was just another way of "reaching out" to foreign nations of every stripe, whether it is France or Iran, Germany or North Korea, no difference. He evidently believes that a properly contrite America will be more palatable to friend and foe alike.

One person who was decidedly unapologetic was new GM CEO "Fritz" Henderson. Fritz wasn't about to apologize for his $8.7 million in compensation last year at a failing company, nor was he going to work this year as Rick Wagoner's replacement for $1, as Wagoner had been doing. (Partly through his own efforts, the $6.6 million in restricted stock that was included in his compensation package is presently worth a couple of hundred grand, inevitably on its way to zero.) He wasted no time distancing himself from his old boss while appropriately sucking up to his new boss, the Obama administration. "They think I can lead this company inside or outside of bankruptcy court," he told the Wall Street Journal. And he said he expected the White House auto task force to play an active role in forcing unions and bondholders to make major concessions. (Somehow I suspect that bondholders have more to fear from administration pressure than the unions.)

Speaking of the new White House auto brain trust, now that the government effectively owns General Motors, it would be nice to see some actual car guys on the president's task force. If any are there, they appear to be hiding. Steve Rattner, whose chief credential seems to be his considerable support of candidate Obama, is such a rich investment banker that he's probably driven around by a chauffeur in a limo—not exactly in touch with what will sell to Middle America. Based on some of his commentary, it's pretty clear he was starting at square one: "It's like a Rubik's cube, trying to untwist it and trying to get all the colors to line up," he told an interviewer. "So we've learned a lot about how car dealers work, and how companies get paid when they sell a car to a dealer, and why there are a certain number of dealers more than are optimal. Have we learned everything? Of course not, but I think we are learning what we need to learn to do this job."

Huh? Learning about how the company gets paid when they sell a car to a dealer? And he's just discovering that there are too many dealerships? How about knowing something about the automobile manufacturing business going in, about how our methods and costs give up too much to the foreign competition, or why and how GM made faulty judgments with respect to what cars Americans wanted, missteps encouraged by Congress itself that have now cost the taxpayers tens of billions of dollars with more on the way? How about knowing how to deal with intransigent unions that have for decades extracted contract terms that ultimately imposed costs that made the companies uncompetitive? Learning on the job, apparently from scratch, just won't cut it here.

We've also got three climate-change specialists, an ex-investment banker who was a top advisor to the United Steelworkers, and a former campaign aide who found himself on the National Economic Council. (Clever move there, slipping those environmental-types onto the task force; what a great way to steer the companies, or what will be left of them, hard left towards making only eco-friendly vehicles! This was a page right out of Rahm Emanuel's "Never Let a Good Crisis Go to Waste" playbook.) And let's not forget about Treasury Secretary Timothy Geithner and chief economic adviser Larry Summers. I don't know this for a fact, but somehow I suspect that neither one is a car guy. The least they could have done was get Lee Iacocca out of mothballs. He has some experience with nearly-bankrupt car companies and even resurrected one.

None of this makes much sense but bear in mind that it came during the same week that Congress paid its aides handsome bonuses, without any ensuing outcry. Yet somehow in the midst of all this insane policy the market managed its largest four-week percentage gain since 1938. While maybe only the continuation of a snapback in an oversold market, the move was actually supported by some modestly improving fundamentals in durable-goods orders, existing home sales, housing starts, retail sales, consumer spending, and, probably most significant, consumer confidence.

Perhaps we're seeing the early signs of recovery in an American economy legendary for its robustness and durability. But if the majority in Congress and the administration continue to push policies and programs aimed at social engineering and wealth redistribution rather than economic revival, without regard to the corrosive effects of high taxes, huge budget deficits, inevitable inflation, and the significant burden inflicted on future generations, this rally will be choked off quickly, like it never happened.

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