General Motors, The Feds.

In the early days of this blog, I wrote a lot about political issues. Frankly, when I was getting going in the blogging world almost five years ago, it was about the only thing I knew to do. Political blogging was huge and it was about the only kind of blogging that registered on the radar. Over the years, I’ve found my niche and it is clearly what you find here today. However, today I need to address a huge issue facing the American public, small businesses and every aspect of the American fabric of society. I must get this off my chest, because it matters to business in a way that nothing else in our lifetimes has.

As time goes on, I have gone from extreme right wing conservative to moderately progressive and still trend right on some issues. It doesn’t really matter though, because the principles that I believe in are firmly based in a sense of pragmatic, if not downright cruel, reality.

Over the weekend, the Obama administration did something completely unthinkable that will have a longterm negative impact on the enterprising and innovative American markets. The federal government made board level decisions on behalf of a publicly-traded company, General Motors.

It is clear to any objective mind that the General Motors (and to a lesser extent Chrysler) proposal for restructuring in the face of bankruptcy, and to secure taxpayer funds, was less than adequate. In fact, some rumors from within the company suggest that GM essentially sat on their hands as they approached the deadline originally agreed to with the Bush administration. Clearly, this is less than acceptable. Clearly, this mindset believes that they truly are “too big to fail” and that the feds would simply swoop in and rescue them yet again.

Clearly, clearly, clearly. Yet… none of this is clear.

The Obama Administration suggested a change to threatened the GM board of directors that they had to remove CEO Rick Wagoner.

I understand why. If Wagoner was too sluggish in his behavior, or “sat on his hands pending an Obama bailout” then he certainly needed to be removed. All evidence points to only positive results from his removal. However, the federal government directly intervened in the private sector governance of a publicly traded company.

This outrage is enough, but somewhat legal if they own a portion of the stock. IT’s expected that, as shareholders, the government would want a say.

However, here is the part that no one is talking about. In essence, General Motors has become a Wholly Owned Subsidiary of the United States of America. While your Orwellian alarms go off, let me rub salt in the wound. The SEC is supposed to regulate GM. That’s right, the Securities and Exchange Commission, a fully functioning independent agency of the U.S., is now tasked with regulating itself.

Can anything good come from this? I think not.

In an ideal world, one filled with unicorns and gryffons and other mythical creatures, the SEC executes their funtion without privilege or bias. In an ideal world, GM adheres to the same regulations put in place by the SEC that governs the market. In an ideal world. Since when has self-policing ever worked? Especially with the SEC.

To make matters worse, in an effort to stimulate company growth and remove government ownership of the company (yeah, right), the Feds are likely to make moves that will help GM, but may undercut the market. For instance, cutting the MSRP of automobiles by a certain percentage to stimulate sales. These kinds of actions are generally regulated by the Justice Department (as well as the Commerce Department) and fall under unfair trading practices.

At what point is a U.S. owned company able to compete on the open market without undercutting market tensions and forces, and at which point does the “adherence to market principles” mean the destruction of the company?

My feeling is that the longterm ramifications of bailing out and direct government intervention into the governance and conduct of a company is a dangerous precedent. Beyond a dangerous precedent, I believe it will only exacerbate the complete destructive collapse of the economy.

There will be some who call me crazy. Who call me a sensationalist. That tell me I am too conspiratorial. Remember this post when my predictions actually come to fruition. Within six months.