And They Say Crime Doesn't Pay

by BILL WADDELL

Bank of America got $25 billion last Fall, then another $20 billion in January, plus a guarantee against losses of $118 billion, and now the New York Times is reporting that the bank also grabbed another $5.2 billion unbeknownst to the rest of us through an outfit called American International Group. By my arithmetic, that comes to a shade over $168 billion of our cash the bankers needed to cover their screwups.

Part of the bailout money went to cover the $20 billion+ losses of Merrill Lynch, which the B of A bought knowing full well that Merrill Lynch had lost all that money. It also went to pay hundreds of millions of dollars in bonuses to thousands of Merrill Lynch employees right before the deal closed.  The B of A then covered the bonuses with the first bailout check, and is now dragging their feet as the New York State Attorney is demanding the details.

The boss at the Bank of America - a good old boy named Ken Lewis - not only stays out of federal prison, he keeps his $10 million a year job.  Note: In fairness to Mr. Lewis, he demonstrated great personal sacrifice by settling for $10 million in 2008 while the bank was in D.C. with its grubby hands out.  The previous year he took home $20 million.

Contrast that sad story with GM.  They get $9.4 billion - 95% less than the shifty banker got.  And now for reasons Mr. Obama has yet to explain, if GM wants another dime, the big boss has got to go. Rick Wagoner is fired.

As readers of Evolving Excellence well know, I am hardly a member of the Rick Wagoner fan club, but no one has ever breathed an insinuation that he is sneaky, devious or in any way dishonest - like the bankers and brokers with their bonus shenanigans.  No State's Attorney's Office has reason to investigate Wagoner, or his management of General Motors  

What are we to think of this other than to draw the obvious conclusion:  The folks in the financial community can play as fast and loose with ethics, the law and other people's money as they want without consequences. Manufacturers, on the other hand, can't even fail, let alone wallow in the self-serving ethical sewer the bankers and brokers inhabit, without losing their jobs.

What's up with that???

There might have been some logic behind it had Obama demanded that GM put a manufacturing pro in charge like Alan Mulally at Ford where a bailout wasn't needed, but no.  Wagoner is being replaced by Fred Henderson - another in a long line of career GM accounting and finance guys a whole lot like Wagoner.  So what's the deal?

We are told we have to follow through on bonuses to sleazy bankers and Wall Street shysters or else they won't be able to attract the best talent.  But throw the manufacturing bum out on his ear - after all, anybody can run factories ... is that it Barack?  Screw the manufacturers and fawn over the bankers and brokers? 

Why didn't UAW President Ron Gettlefinger get canned part of the mandate? Didn't the union have an awful lot to do with the mess at GM? Or maybe canning Wagoner is Obama's way of helping his union backers by giving GM management a hearty head slap. 

Whatever this deal it is, like just about everything Obama has touched in his first few months on the job, it stinks. Bankers and union bosses sail through the economic mess unscathed, while manufacturing management and manufacturing workers get the shaft.

Most laughable is that the auto industry crisis is largely the result of bankers so fouling things up that no one can get a car loan.  If the Bank of America had found their way clear to make just a little bit of the $168 billion available for people to buy Chevys, maybe GM wouldn't be in such dire straits.  Just a billion or two of it would have helped, but no, that hasn't happened. 

You blew it Rick.  You have acted honorably, and naively thought you were dealing with honorable people. Shoulda paid yourself a whopping bonus out of the $9.6 billion instead.

Comments

[david foster]

I don't have a very high opinion of Ken Lewis, but see no evidence that he's done anything actually illegal.

Regarding the preferential treatment of banking vs manufacturing..which indeed seems to be the case...several possibilities. Might it have something to do with campaign contributions, which probably swung much more Democratic from the banking industry than from manufacturing? Or might it have something to with educational and family pedigrees, which, to the typical Washington insider, probably look much more like "our kind of people" when a banker is involved rather than a manufacturing person? Or maybe the politicians are impressed with the apparent complexity of banking, and fail to understand the complexity of making and selling things?

[William Pietri]

I think about 60% of the reason is just crony capitalism, which makes me want to get out pitchforks and torches. But the other 40% is that the financial system is prone to systemic collapse in a way that the auto industry isn't. If Chrysler collapses, that won't bring down Toyota. But losing just one investment bank nearly crashed all of them, plus quite a lot else.

[Mark Graban]

I hope Fritz is just a caretaker CEO. They could really use some fresh blood and outside thinking.

Gary Convis is available, probably.

[Mike Gardner]

I think it sets a very dangerous precedent for the president to act in such a manner. Really, it's time for the Supreme Court to intercede and inject some constitutional restraints on both the executive and legislative branches of what we can only jokingly refer to as "government."

As for GM, I remembered this: :"If they (customers) no longer care about you, if you continue to make yourselves irrelevant to them, you're dead." Warren Brown in The Washington Post, April 2006 on GM and Delphi. OK, RIP GM.