Why no GM treatment for Wall Street?

by Frank James

Some observers are noticing what they believe is disparate treatment between the way Rick Wagoner, GM's CEO, is being shown the door by the White House and the Obama Administration's seemingly more tolerant stance towards the financial-service CEOs.

Here's David Sirota, the progressive colmnist and blogger:

The Associated Press reports that "General Motors Corp. Chairman and CEO Rick Wagoner will step down immediately at the request of the White House, U.S. administration officials said Sunday." I'm not sure that's a good or bad thing, but I am curious about why the White House would make such a bold demand of a car company the federal government is lending to, but not a similar demand of the banks the federal government partially owns?

What I mean is - how is it that the White House is requesting the resignation of GM's CEO while not doing the same of, say, Bank of America's CEO? In fact, not only is the president not demanding the resignation of bank CEOs, he's actually hosting them for photo ops at the White House. Sure, I know some bank CEOs resigned a few months ago under shareholder pressure, but the Obama administration has never publicly demanded such resignations of the current management that is making the problems worse, nor the resignation of management at the biggest firms (Goldman Sachs, BofA, etc.) that are still in place.

And Barry Ritz of The Big Picture blog:

I am no fan of Wagoners, but I have to ask the geniuses behind the bank bailouts: When are you going to ask the TARP and bailout recipients to step down? Ken Lewis being asked to step aside after many years of running BofA ? How about Blankfein? Pandit? And the rest of the TARP recipients?

This inconsistency from the new administration is very disappointing.

One possible explanation: the White House is afraid of driving Wall Street types further into their bunkers by taking punitive actions while it perceives less potential fallout from dumping Wagoner by the side of the highway.

It's widely accepted for the economy to have its best chance at recovering soon, financial institutions must start lending.

The calculation may have been made at the White House that if it started making top Wall Streeters walk the plank, financial types might resist the administration's very delicate plans to clean up bank balance sheets. That, in turn, could extend the credit crisis and the recession.

Thus the banks have leverage in more ways than one. Put another way, it's the difference between why countries without nuclear weapons get invaded and those with them don't.

There's also the suspicion that a White House with strong ties to Wall Street is way more sympathetic to the major financial players than it is to GM.

That suspicion is going to be hard for the administration to dispel, seeing as the Treasury secretary is a former New York Federal Reserve president and the White chief of staff a former investment banker.

Of course, the Obama Administration could be hoping that ousting Wagoner has the salutary effect of showing Wall Street it means business, leaving hanging in thew air the unspoken thought that some financial leaders could be the next to issue the obligatory press releases about exiting "to spend more time with their families."

So it's a twofer; Obama gets rid of Wagoner, which will likely be welcomed in Congress and by the public, and he sends a message to Wall Street.

Of course, Wall Street has ways of sending its own messages, like just sitting on its hands.