President Obama, with seven days of unprecedented market intervention capped by Monday’s ultimatum to U.S. automakers, has made one thing emphatically clear: He is the most powerful player in American business today.
Obama’s move to oust the CEO of GM and put Detroit on notice that he is prepared to let icons of American industry fail if they refuse to bend to his will was a calculated attempt to send a message, said an official often consulted by the administration. And that message was unmistakable: In any business-government partnership, Obama himself expects to play the dominant role.
“He’s realizing, ‘Hey, the economy’s mine now, and I better do it my way,’” said the official. “So the administration is collaring people and letting them know who’s in charge. The days of saying, ‘It’s not our economy’ have come to an end.”
An Obama administration official said the president’s hard-nosed approach will continue. “We’re not going to reward failure,” the official said. “We’re in an economic crisis, which takes shared responsibility and shared sacrifice. The only way that we will recover is if everybody puts a little skin in the game.”
Officials said the evolution of Obama’s increasingly tough tactics has been partly human: He became exasperated when bailed-out banks continued buying planes and paying bonuses at a time when so many people were losing jobs. He took it as a slap in the face — and knew that Americans seeing it on TV would, too.
In a 150-hour period, starting last Monday, Obama put the government in the business of partnering with investors to buy up $1 trillion in high-risk bad assets. The move single-handedly caused a market rally and breathed life into bank stocks.
His administration then called for a whole new set of government regulations for high-flying hedge funds and other financial institutions. If successful, he will be the first president with the power to take over not only banks but also other financial firms, including big insurance companies (take that, AIG).
At week’s end, the president hauled in CEOs of big banks and later said he had lectured them on how to run better and more trusted businesses.
Most amazingly, he then pushed out Rick Wagoner, the CEO of General Motors, and vowed to let Chrysler fail if it didn’t merge with another company within a month.
Taken alone, the moves are remarkable. Taken together, they amount to a major exercise of presidential power — the imperial presidency applied to the economy to a sweeping degree not seen in decades.
“The message from the Obama administration to the auto industry is loud and clear: Restructure or die,” Harvard Business School’s Rosabeth Moss Kanter said in POLITICO’s Arena discussion. “If the government invests or lends, then, like any bank or investment group, it can demand accountable leadership that can deliver performance.”
But Obama’s move, particularly his dramatic ultimatum to Detroit, puts government in a role better performed by the private sector.
Said David Boaz of the Cato Institute in The Arena: “Rick Wagoner may be a bad CEO, or he may be a victim of difficult conditions facing the legacy auto industry. In either case, board members and investors are the right people to make that decision. I don’t know who should run GM, and neither does President Obama.”
Behind the scenes, Obama seems increasingly comfortable with his assertive role, according to Democratic officials. This mentality pervades the entire White House team — and it was on full display at Friday’s meeting with big bank CEOs. A source familiar with the meeting said that when one of them questioned the price buyers would be able to get for the bad loans known as toxic assets, White House chief of staff Rahm Emanuel jumped in to say: “Let’s do the deal right here.”
Obama, who entered the White House with notably little business experience, is trying to position himself as a common-sense centrist when it comes to bailouts, aides said. He rejected calls from leading liberals to nationalize banks and ignored pleas from Michigan Democrats to be as generous with the auto industry as he has been with the banks.
It should come as no surprise that Obama is trying to claim the middle ground. He picked Timothy Geithner for Treasury, Emanuel as chief of staff and Lawrence Summers as his top domestic adviser for a reason. All three are more in the moderate vein of President Bill Clinton than the liberal lane of House Speaker Nancy Pelosi.
So far, the president has not alienated the business community — and, in some cases, has found ways to win over executives who had been skeptical at best.
“His criticism of industry leaders has been well-placed and dead on, but he’s managed not to demonize or disparage the whole capitalist system,” Democratic strategist Jim Jordan said. “There’s nothing in the world that has the center of gravity to fix so much profoundly broken stuff. It’s got to be the federal government, and he has the confidence and approval rating to be able to try it.”
Obama also has tried to show he’s willing to listen. Some business leaders had complained that no one heard their views because Geithner was so swamped, with few deputies in place and constant demands from the cratering economy and an impatient Capitol Hill.
So Obama has had a series of West Wing meetings with executives in which he has heard about the problems of specific industries, including technology, hospitality and the airlines.
In an interview with CBS’s “Face the Nation,” Obama said he had lectured the bankers: “Show some restraint. ... Let me help you — help me help you. ... It’s very difficult for me as president to call on the American people to make sacrifices to help shore up the financial system if there’s no sense of mutual obligation.”
But participants said he conveyed the message diplomatically, saying little and drawing out almost all of the bankers to find out what was on their minds. They said they felt consulted, not scolded — another victory for the young president.
Obama used a similarly deft touch in letting Midwest lawmakers know about the harsh medicine he planned for the carmakers. In the Oval Office on Sunday evening, Obama called Sen. Carl Levin (D-Mich.) and three other lawmakers for a long conversation in which he argued that the industry could become viable again through the unpopular plan he was about to propose.
Levin praised the president for a “good give-and-take.” But the senator recalled that there was no opportunity to change the president’s mind about his insistence that Wagoner resign as GM’s CEO. Levin said Obama’s mind was clearly made up: “He didn’t ask us about it. He informed us.”
Alexander Burns, Eamon Javers, Lisa Lerer and Manu Raju contributed to this story.