Meet the New Boss, Same as the Old Boss: Obama Asks Bush to Bail Out Automakers

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This is not an easy post for me to write.  I sincerely hope Obama sticks to his promise to look out for the middle class.  To put an end to our current corporate climate where all the risk is socialized and all the rewards are privatized.

The Bush administration, which has presided over a major intervention in the financial industry, has balked at allowing the automakers to tap into the $700 billion bailout fund, despite warnings last week that General Motors might not survive the year.

Separate from his differences with Mr. Bush, Mr. Obama has signaled to the automakers and the unions that his support for short-term aid now, and long-term assistance once he takes office, is contingent on their willingness to agree to transform their industry to make cleaner, more energy-efficient vehicles.

That’s all well and good but the auto industry should be forced through regulations to make cleaner, more energy-effecient vehicles on their own, seperate from any stimulus package.  Companies cannot be consistently rewarded for running an entire industry into the ground only to be bailed out by our tax dollars.

In 2008 Daniel H. Mudd, CEO of Fannie Mae had a base salary of $986,923.  After his bonus, stock awards, change in pension value and other compensation his total compensation was $14,231,650.  That works out to about $4,561/hr based on a (probably generous) 60/hr work week.  All of this while his company so far has posted over $31 billion in losses in 2008.  Imagine how much his bonus would have been if they had actually been operating in the black.  That’s a pretty generous salary for the CEO of a company that was doing so poorly it had to be seized by the government this year.

Washington’s growing financial sector was one of the first to feel the effects of the year-long slide that grew out of the mortgage mess. Although most financial firms saw their stocks wither, the industry’s top executives continue to be among the best paid in the region, according to a Washington Post survey of large public companies.

Now for the General Motors bailout.  Let’s look at a few facts.  Since Richard Wagoner took over as CEO of GM in 2000 here’s a short-list of what he’s presided over:

• GM paid huge dividends even as its pension and health care obligations spiraled out of control leaving the company in a precarious capital position.
• When SUVs started to get hot, GM essentially bet its future on the continuation of that trend and the reasonably low gas prices that made it possible. That’s right: GM was essentially an commodities speculation hedge fund masquerading as a car company. Now Bloomberg is reporting that GM lost $2 billion on leased SUVs.
• The stock was trading in the $60 per share range when Wagoner took the helm and now it’s fallen to $11.07 $4.36 and Merrill Lynch is saying that a GM bankruptcy is “not impossible.” And remember: Merrill Lynch has been overly optimistic about its own ability to survive without raising capital. So “not impossible” may very well mean “quite possible.”
• The company announced a third-quarter loss of 2.5 billion dollars and said it had burned through another 6.9 billion of cash during the three-month period, leaving it with cash reserves of 16.2 billion.

In 2007, Wagoner took home $14,415,914, a 41% raise over 2006.

If we are going to continue to dump taxpayer money into these bohemoth money vacuums we need to socialize the rewards as well as the risk.

The middle class you spoke of so often on the campaign trail Mr. Obama, most of them cannot fathom such salaries.  Many of them put all of their hopes into you to help lead us into change.  You cannot stand by while corporate America continues to plunder the middle class, the backbone of this country.

Even as the company was pleading the federal government for another $40 billion dollars in loans, AIG sent top executives to a secret gathering at a luxury resort in Phoenix last week at a cost of $343,000.

No, that’s not a repeat of an old story.  Yes, it happened AGAIN.

Any consideration of a bailout of any industry must go hand in hand with a government takeover and restructuring of executive salaries and corporate waste and greed on the taxpayer’s dime must be made an example of.  Otherwise, please leave our money out of this mess.

“No taxation without representation” began as a slogan in the period 1763–1776 that summarized a primary grievance of the British colonists in the Thirteen Colonies. In short, many in those colonies believed the lack of direct representation in the distant British Parliament was an illegal denial of their rights as Englishmen, and therefore laws taxing the colonists (the kind of law that affects the most individuals directly), and other laws applying only to the colonies, were unconstitutional.

Now, 232 years later the people need a new slogan to rally around.  “No risk without reward”.  If you are going to gamble our money on whether or not a company that has consistently proven unable to survive on its own, even as its executives continue to garner extravagant salaries, we demand a new level of accountability from the executives while we see tangible returns on our money, without which none of this would be possible.

Tagged as: bailouts, barack obama, corporate whoredom, daniel h. mudd, Politics, richard wagoner