Tuesday, March 31, 2009

Taking Him Seriously

One of the side effects of President Obama’s firm dealing with the auto industry is that it seems to have scared the crap out of the banking industry.

“Is there a heightened risk for the Obama administration” to remove a banking executive? asked Scott Talbott, chief lobbyist for Financial Services Roundtable. “I think you’d have to conclude that the answer is yes.”

Banking executives and analysts said Monday that if the administration were to replace a bank chief executive, it would likely be someone from an institution that has received large amounts of federal money.

The government is currently stress-testing the nation’s 20 largest banks and “maybe three fail the test,” said an executive at a large bank receiving government funds. Obama “could remove the heads of those banks,” the executive said.

But the executive, who spoke on condition of anonymity because of the sensitivity of the matter, said he was not nearly as concerned about the ousting of GM’s chief executive Wagoner as they were about legislation passed by the House of Representatives this month to tax Wall Street bonuses, including those of non-executives, by 90 percent.

Good; I hope the banking industry finally gets it that both the people and the Obama administration are fed up with the delaying tactics and non-productive restructuring that have heretofore been the responses of the companies that came to the feds for bailouts last fall. The attitude seemed to be that they could do the humility shtick and get loan guarantees with no consequences; after all, Washington used to be the place to go for sympathy for big business. Now all of a sudden they see that the president really does mean business.

It’s not like Mr. Wagoner will be living in a cardboard box — he’s getting $20 million in pension and retirement benefits. And while I think the criticism that Obama was tougher on the auto industry than on the banks has some merit, the auto industry’s collapse would have more of an immediate impact on a lot more people than the collapse of Citibank. After all, the FDIC protects depositers, but right now, someone needs to watch out for the thousands of companies and millions of employees who are tied into the auto industry.

If seeing the GM CEO get his head handed to him gives some folks in the banking business some sleepless nights — especially Citibank — so much the better.