Axing CEOS Is Entertaining, But It Doesn't Solve Our Economic Crisis

By Frank Rich, The New York Times. Posted April 6, 2009.

Even among pitchfork-bearing populists, there was scant satisfaction when the White House sent the C.E.O. of General Motors to the guillotine.

Sure, Rick Wagoner deserved his fate. He did too little too late to save an iconic American institution from devolving into a government charity case. He embraced the Hummer. G.M.’s share price fell from above $70 to under $3 on his watch. Yet few disputed the judgment of the Michigan governor, Jennifer Granholm, that Wagoner was a “sacrificial lamb,” a symbolic concession to public rage ordered by a president who had to look tough after being blindsided by the A.I.G. bonuses. Detroit’s chief executive had to be beheaded so that the masters of the universe at the top of Wall Street’s bailed-out behemoths might survive.

On this point even the left and the right could agree. The union leader Andy Stern publicly wondered why the administration didn’t also dethrone Ken Lewis of Bank of America. Thaddeus McCotter, a conservative Republican congressman from suburban Detroit, asked, “When will the Wall Street C.E.O.’s receiving TARP funds summon the honor to resign? Will this White House ever bother to raise the issue?”

When reporters did raise the issue of a double standard to the White House press secretary, Robert Gibbs, they got double talk: “I don’t have anything specific on Bank of America.”

But even as that unanswered question hangs in the air, a more revealing inquiry might be this: Why is there any sympathy whatsoever for a Detroit C.E.O. who helped wreck his company, ruined investors and cost thousands of hard-working underlings their jobs, when there is no mercy for those who did the same on Wall Street? Might we, too, have a double standard? Could we still be in denial of the reality that greed and irresponsibility were not an exclusive Wall Street franchise during our national bender?

Perhaps we’re tempted to give Detroit a pass because it still summons nostalgic memories of “American Graffiti,” “Little Deuce Coupe” and certain things we used to do in the back seat of a Chevy. Wall Street and bankers are the un-aphrodisiac: “Bonfire of the Vanities,” Old Man Potter of “It’s a Wonderful Life” and, of course, Gordon Gekko of Oliver Stone’s “Wall Street.”

Though Gekko’s most famous line is “Greed is good,” even more emblematic is his defiant summation of his brand of capitalism: “I create nothing. I own.” At least Wagoner, unlike the sultans of finance, created cars, clunkers though they often were. The politically conservative Nashville star John Rich draws this moral distinction in his powerful new hit single “Shuttin’ Detroit Down.” Motor City is “the real world,” he sings, unlike those big shots “living it up on Wall Street in that New York City town.”

But this romantic view of the auto industry is a sentimental illusion. Some of Wall Street’s exact failings also capsized G.M.: the hard sell of alluring but junky products, crony capitalism, reckless gambling, unregulated accounting sleights of hand. Only if we accept the full extent to which the bubble virus spread beyond that New York City town can we grasp the radical treatment President Obama must administer to restore the nation to health.

The parallels between G.M. and the likes of Citigroup are uncanny. Much as bloated financial institutions gorged on mortgage-backed derivatives even when the underlying fundamentals made no rational sense, so G.M. doubled down on sure-to-be obsolete S.U.V.’s and trucks to serve a market transitorily enthralled by them. Much as the housing boom’s collapse left the get-rich-quick holders of AAA-rated mortgage derivatives with worthless paper, so the oil price spike left consumers trapped with self-indulgent, wealth-depleting gas guzzlers. In both instances, the customers were not entirely innocent.

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