Frustrated Americans cheer Obama's tough auto moves
NEW YORK |
NEW YORK (Reuters) - Some frustrated U.S. taxpayers cheered President Barack Obama's tough steps to shore up the reeling auto industry on Monday but critics called his decision to fire General Motors' chief a heavy-handed power grab.
Obama forced out General Motors chief executive Rick Wagoner, pushed Chrysler LLC toward a merger with Italy's Fiat SpA, and threatened bankruptcy for both, marking an escalation in Washington's involvement in rescuing the faltering economy.
Skeptics asked whether it was an early sign of a more activist administration or an isolated example. GM shares tumbled 30 percent on the news and the Dow Jones Industrial average sank nearly 4 percent.
Experts called it potentially the most significant presidential intervention in the private sector since Harry Truman tried to seize the steel industry during the Korean War in 1952, only to be rebuffed by the Supreme Court.
"I don't think the president should be running the economy. They should have let the company go bankrupt. The guy would have lost his job anyway," said Edward Prescott, a 2004 Nobel laureate in economic sciences.
As a candidate last year, Obama supported rescuing the financial sector, and since then he has shifted to attacking the bonuses and corporate jets for companies taking taxpayer money to pushing out a CEO and replacing members of the board of directors.
"Politics is certainly entering the process. GM should have gone into bankruptcy in the fall. We would be much further along with the workout by now," added Randall Filer, a professor of economics at Hunter College in New York.
Stephen Schork, editor of an industry report on the energy and shipping markets, feared Obama was trying to engineer a hasty conversion to green energy. "They are expressing abject hostility toward the hydrocarbon industry," Schork said.
WILL POPULAR SUPPORT HOLD?
At the same time, Obama's approval ratings have held firm above 60 percent in most public opinion polls. In a Cincinnati coffee shop, retiree Sharon Schmidt, 74, said she supported the decision to push Wagoner out.
"If GM is going to take a big bailout from the federal government, the people who brought it to this state should probably go," Schmidt said. "These bankers and so on are making million dollar bonuses? They should be gone, too."
In a Dallas suburb, accountant John Shaffer, 47, also approved. "I feel he was fired to force the unions and bond holders to seriously negotiate with the company. So I think it was good," he said.
Stephen Hess, a presidential scholar at the Brookings Institution, said Obama's action lacked any historical parallel because the circumstances of the financial crisis were unique and he could succeed because he seemed to have a good "internal gyroscope" on reading the mood of the public.
"So far people are with him," Hess said. "There will be a lot of people who say: At last somebody is doing something."
Opposition from Republicans in Congress was fast and fierce.
"With sweeping new power the White House will be deciding which plants will survive and which won't, so in essence, this administration has decided they know better than our courts and our free market process how to deal with these companies," said Republican Senator Bob Corker of Tennessee.
But in a sign Obama may find some support from the Republican minority, Representative Darrell Issa of California said Obama has "struck the right chord in seeking balance between supporting the American auto industry and calling for a much-needed restructuring."
(Additional reporting by Thomas Ferraro in Washington, Andrea Hopkins in Cincinnati, Ed Stoddard in Dallas and Pedro Nicolaci da Costa in New York; Editing by Vicki Allen)
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