Well Wall Street is nervous this morning, but since Wall Street is driven by greed and fear and not much else, this is a very healthy sign. There has been too much optimism recently that fueled the 1000 point rise in the Dow. Clearly the economy is not going to turn around on a dime (or ten trillion dimes), even with policy on the right track. So to see Wall Street renewing its fears about banks and cars is a positive sign today -- capitulation is a necessary precursor to any turnaround. And capitulation on the scale required will not happen in a day.
The auto plan announced this morning, which includes the ouster of Rick Wagoner from GM, is an extremely serious but positive sign.
Yes the administration is catching flack this morning from Wall Street and the talking heads -- the same breed really -- but the plan is a master stroke, and I don't mind saying so.
The president said that the car industry is not doing enough to restructure seriously or quickly enough. While the prospect of the government forcing out a CEO is indeed breathtaking, it is concurrent with the needs of the time. It has been all too obvious since last fall that the auto companies have been thinking that if they can just get through this economic turbulence, then they can return to whatever course they thought they were on.
This morning the president ended that thinking.
What the auto executives have not been considering is that as many as 1 in 7 jobs in the country are connected to the auto sector. What must precipitate any economic turnaround in this nation? Answer: a turnaround in the jobs market. Therefore, without significant reform in the auto industry to stoke financial confidence in the industry that will lead to renewed investment, renewed demand at the producer level, and renewed jobs, there will be little chance of a robust economic turnaround.
The auto sector helped make the middle class in this country. It can help save it.
So what the administration has announced this morning is a bold statement that clarifies this moment in economic history: the government represents the taxpayers as the shareholders, and not instead of the shareholders. This is the correct and only correct concept.
Where taxpayer money is used as a lifeline for private companies, then those companies have a fiduciary responsibility to the taxpayers as shareholders, and in turn the administration correctly understands that Treasury's fiduciary duties are to taxpayers, the American public. In other words, this is capitalism at work.
This is a brand new phenomenon, make no mistake. It's provocative and maybe a bit frightening because it marks a sharp departure from historic economic policy. We have not seen this before. But then we haven't seen economic conditions like this before.
This morning the administration shows that it understands the lay of the land. It understands that it can use policy to help shape and encourage an economic recovery - not socialist policy, but shareholder policy.
It understands that Wall Street must see that the taxpayers are these companies' primary shareholders right now -- not because we are a socialist nation, but because the taxpayers have paid for their shares.
American capitalism is in a crucible no doubt. But there can also be no doubt today that American capitalism is still very alive. Today's policy shows the administration's commitment to America's system of democratic capitalism.
Let the socialist meme die an undignified and ugly death.
