Government Intervention Good For Economy And Business, GM Proves Case

I want to take my readers back in time and recount the turmoil our nation had to go through to get to the point today were GM is once again profitable.  There is a lesson in this story for the work that needs to occur in the months ahead on a wide range of issues. 

First there needs to be leaders from both parties moving in concert, and second we must throw out the old notion that government should never be involved in private industry, or that it is best when limited in scope.   The following makes the case why bi-partisanship is needed, and clear thinking is best when crafting policy.  It is time to move beyond the tired rhetoric that limited our approaches and instead reach for new ways of making the future better.  The way the U.S. government dealt with GM is a great case to reflect on.

On December 12, 2008, like several occasions during that time period, I threw my support behind President George Bush. (I was a strong advocate of TARP, and still am.) I have always stood with leaders, regardless of political party, when the correct decisions were made. 

It was just plain short-sighted.  But that is the tone we have come to expect from the Republicans in the U.S. Senate.   I just can not fathom how the interests of the nation at this time of recession came in second place to their outdated philosophical notions of how government should operate in relation to the needs of private industry.  Especially when the industry in question, the car companies, impacts so fully much of the broader economy.  Even though everyone knows the needs of the auto giants, the Republicans in the Senate still decided that politics was more important than national good.

Clearly the car companies have major problems, some of their own making, while others are due to lack of Congressional pressure over the decades to force higher gas mileage standards, and other ideas on the companies.  But at this time of national economic peril it is not the time to start the larger discussions.  It is time to act.

And thankfully, and I can’t believe I am saying this, President Bush is about to act, and act correctly.  Wonders never fail to show up in the world.  But seriously, I am pleased that Bush has seen the light and will use his power to do that his fellow Republicans would not do last night.

I weighed in on the moves President Obama made in relation to GM.  It might be important to recall that the charges of government takeover and socialism abounded.  Matt Drudge was going crazy reminding anyone who would listen that America was forcing a company exuecitve from his positon.  With that in mind I wrote the following on March 30th, 2010.

It is obvious to all that the car makers in this country are needed in order to insure that the economy does not further collapse, but it is also obvious that there needs to be corrective measures taken that moves toward solving the systemic industry problems.  So when the news was reported that GM CEO  Rick Wagoner was for all practical purposes fired, I applauded the move.   It was swift action by President Obama following a complete review of the auto industry, along with a firm understanding of the degree to which taxpayers need to be involved with keeping this segment of the economy afloat.    In order to achieve that needed result, the taxpayers must be assured that the money they invest into these private companies are well spent and focused on new growth, as opposed to covering up old problems.  It is for that reason that Rick Wagoner is no longer head of a car company.  His $20 million retirement check should soothe any jangled nerves the distraught executive might feel after driving a car company off a cliff.

The reaction to the move by the Obama administration on Wall Street has been less than well received, and that is too bad.  Short-sighted anxiety about the role President Obama plans to exercise when it comes to fixing our economy will give way to calm as the months move along.  There will be flash points to be sure, but one thing is becoming clear in the corporate boardrooms, and that is that those executives who make horrible decisions that impact the national economy will have to take responsibility for their actions.  And it they do not, someone will make them do so.

Then today there is this news.

GM sold about 478 million shares Wednesday at $33 each, a price higher than the company and its bankers thought was possible just days ago. An additional 71.7 million shares could be sold through the overallotment. GM also sold $4.35 billion in preferred shares.

The proceeds will help pay back the U.S. government for the $49.5 billion it spent on its controversial rescue of GM, which has gone from losing billions of dollars a year to making $4.07 billion so far in 2010. The Detroit company, after eliminating half its eight brands, slashing its debt and trimming its work force in bankruptcy, has been gaining U.S. market share with strong-sellers such as the Chevrolet Equinox and Buick LaCrosse after years of seeing customers slip away to foreign-based rivals.