THAT'S MORE LIKE IT:

Obama to shake-up GM, Chrysler (MIKE ALLEN & JOSH GERSTEIN | 3/30/09, Politico)

In surprising findings to be outlined at the White House on Monday, President Obama has concluded that neither GM nor Chrysler as they now exist deserve more bailouts. But the White House is sparing them for a month or two, and is promising American consumers that the government will stand behind warranties if the automakers fail.

Most remarkably, the administration demanded that GM CEO Rick Wagoner resign so the company could remake itself “with a clean sheet of paper.” And he did, effective immediately. The administration also said GM has been given a “goal of replacing a majority of the board over the coming months.”

The administration found that both carmakers had failed to prove their “viability” as required under the terms of the massive government loans they’ve already received, and determined that neither should receive another bailout.

“We have unfortunately concluded that neither plan submitted by either company represents viability, and therefore does not warrant the substantial additional investments that they requested,” a senior administration official told reporters on a conference call Sunday night.

Easy enough to follow W's lead there, but he deserves credit for doing so. How about being just as decisive with the banks?

MORE:
Balancing Banks (James Surowiecki April 6, 2009, The New Yorker)

Not long ago, many of America’s biggest banks made terrible bets on overpriced real estate and suffered huge losses. While the banks insisted that they were fundamentally healthy, economists and politicians declared many of them to be insolvent. Government regulators, though, allowed the banks to stay in business. The banks hunkered down and cut back sharply on new lending, and the resulting credit crunch made an already weak economy worse.

That sounds like the story of what just happened to the U.S. economy, but actually it’s the story of what happened at the beginning of the nineteen-nineties, after banks found themselves sitting on billions in worthless loans to Sun Belt developers and other commercial builders. And, if you tweak the details a bit, it’s also the story of what happened in the early eighties; that time, it was loans to developing countries that got the banks in trouble. In other words, while the current banking crisis is exceptionally severe, it’s not exactly new. It’s the third major banking crisis in the past thirty years, which is at least a couple of crises too many. And that’s forcing the Obama Administration to confront two huge tasks at once: rescuing the economy from the current meltdown, and figuring out how to prevent the next one.

The rescue effort, surprisingly, may be the easier of those tasks; although recurrent financial turmoil is hardly a confidence-booster, the fact that the U.S. economy—unlike, say, Japan’s—has recovered well from previous banking disasters offers hope that the government’s strategy will work. Many economists and pundits have argued that the only solution is to nationalize the weakest big banks, wiping out shareholders and management.

Posted by Orrin Judd at March 30, 2009 7:45 AM