U.S. in Control: Its Goal To Fix, Not Run, Firms; A Reluctant Role as Main Shareholder
When it comes to justifying state control of big corporations, Barack Obama is no Francois Mitterrand.</br></br>When France's late president nationalized huge swaths of the country's financial and industrial base in the 1980s, he made no apologies. Seizing a dozen industrial conglomerates and three banks, Mitterrand insisted that government control was in the interest of the economy. He asserted that the state, which already owned much of the nation's energy and transport industries, was best able to allocate resources.</br></br>Today the Obama administration finds itself in control of many of the pillars of U.S. finance and industry, but it is playing its role reluctantly. Obama's goal is to fix them, not run them, the White House says. With regard to GM, for example, one official said this week that the administration's "goal is to exert as little influence as possible" and "to exit as quickly as possible."</br></br>Yet the Obama administration, on behalf of American taxpayers, has become -- or will soon become -- the controlling shareholder of General Motors and Chrysler, mortgage behemoths Freddie Mac and Fannie Mae, and insurance giant AIG, not to mention the 29 banks taken over this year by the Federal Deposit Insurance Corp. And that puts the president in the awkward position of balancing public policy goals with the financial interests of taxpayers as investors in these ailing corporations.</br></br>"I think it's going to have to be both," said Dean Baker, director of the Center for Economic and Policy Research. The president "shouldn't seek to micromanage by deciding what cars to make if he were CEO." On the other hand, Baker added, the administration "can't escape responsibility for whatever actions the companies do. It can't wash its hands." "In many ways, we are in uncharted and potentially treacherous water here," said N. Gregory Mankiw, a professor of economics at Harvard University who was chairman of former president George W. Bush's Council of Economic Advisers. "It is almost inconceivable that the political process will be good at corporate governance. The most one can hope for is that this period will be temporary, that the federal government will sell off its equity stake to private investors as soon as possible."