Tuesday, March 31, 2009

Why GM's Rick Wagoner, and not Ken Lewis at Bank of America or Vikram Pandit at Citi?

Does it strike you as odd that Rick Wagoner has been forced to walk the plank for his failures as CEO at General Motors, while Ken Lewis continues to hold court at Bank of America, and Vikram Pandit just holds on at Citigroup? The Obama Administration’s approach to the freefall in financial services has always been different than their response to the mayhem in the automobile industry:

· Billions in bailouts for Wall Street; not quite so much for Detroit.
· No questions asked early on about corporate jets on Wall Street; embarrassing the Detroit CEOs into actually riding in their own cars on the way to Congress.
· And now, pushing GM CEO Rick Wagoner out while leaving in place Lewis, Pandit, and Company.

What gives? It may be that the government sees the solution to the financial services disaster as considerably more complex than what is needed for automobiles. And certainly it appears that the consequences of Armageddon on Wall Street are much more severe to the global economy than bankruptcies in Detroit.

But the different approaches by the Feds to these two industries may also speak volumes about their mindset and assumptions. If financial services can’t be “figured out” by a task force working for a month to find solutions (as they did in automobiles), then surely we’ve got to keep the people that got us into the mess in the first place! But, is this really true? I believe this logic is fundamentally flawed, for at least two reasons:

(1) Justice must be done, and seen to be done. For the big banks, this just has not happened. Every week brings new revelations of incredible bonuses to bankers to “retain” their talents despite a track record comparable to the Montreal Expos. Why do we keep shoveling money into their companies when the very leaders who brought this calamity on themselves remain in their jobs? I don’t get that.

(2) Are the Obama economists too attached to Wall Street? The party line from Wall Street is that the housing-fueled, subprime-exacerbated, leverage-over-the-top credit crisis could not have been predicted; ergo, it’s not our fault. Others have pointed out in fine detail how faulty this argument, so why are the Obama economists buying it? I believe it is because of an inherent belief and attachment to the people who make their living on Wall Street, an attachment that biases their ability to be clear-eyed in their assessment of the leadership talent in place.

If Rick Wagoner is being held responsible for “leadership mistakes” at GM, why not Ken Lewis and Vikram Pandit?


  1. Ken Lewis is being treated unfairly. He has had a reputation for being wise and frugal. It is irresposible to attack him. Ken Lewis made one great mistake. He allowed himself to be bullied by the Federal gov't into buying Merrill Lynch. Lewis was said to have "went ballistic" when he heard of the bonuses Thain planned to pay.

    Ken Lewis is a great American. He will prove his worth to this country. It is foolish, unfair and harmful for the pundits to keep bashing him.

  2. Ken Lewis is right. It’s popular right now to beat up on executive pay. And it is true many unethical, unfair bonuses were paid, BUT some select few people are deserving of very high pay. A good analogy can be found by looking at the entertainment industry. TOM HANKS for instance. When Tom Hanks is in a movie he gets paid millions. The movie studios pay Hanks because he has the unique ability to get the public to plunk down money to see him act. I think most people would agree half the successful and profitable movies he was in would have been flops if a different actor had played Hanks role. The financial industry has stars too. I'm talking about the 1 in 100,000 who’s financial minds and work ethic are special. I knew a guy at a Wall Street firm who regularly worked 18 hour days. He generated tens of millions for the firm year after year. A huge earner. A tremendous cash cow for the firm and its shareholders. These select few individuals, if they are heavily taxed, WILL get paid the same huge saleries by foreign banks here in the US. Just for the record, I am not one of these special people. I am simply a patriotic American who sees a big mistake about to be made. -Daniel Long Beach, Ny