WASHINGTON – Shares of Hope and Change, Inc. finally rose this past week on word the North American firm would spend more than $1 trillion to dig itself out of a prolonged economic downturn. Hope and Change (NYSE:HOPE), formerly the United States of America, LLC, has suffered several setbacks since popular new CEO Barack Obama took over following a November shareholder vote.
Obama’s first few weeks at the company have been marred by controversy. Several of his top management picks had reported tax problems – including his new CFO Timothy Geithner. Three nominees for high level positions were forced to withdraw after shareholders uncovered tax and other complications. At the same time, he has encountered serious resistance to the spending plan from staffers loyal to the previous CEO.
That combination weakened the firm’s global standing and complicated Obama’s transition. But even more controversial were comments by the new CEO and some of his management team. Obama, a newcomer to top-level executive responsibility, surprised investors when he criticized Wall Street’s moneymaking on Jan. 30, saying there would be a time “for them to make profits, and there will be time for them to get bonuses. Now’s not that time. And that’s a message that I intend to send directly to them.”
That wasn’t what Wall Street or investors were looking to hear from the inexperienced head of the largest company in the world. But he didn’t back-pedal from the controversial statement, he added to it. He declared that the heads of the various subsidiaries would no longer receive competitive salaries.
“For top executives to award themselves these kinds of compensation packages in the midst of this economic crisis isn't just bad taste – it's a bad strategy – and I will not tolerate it,” he told CNN Feb. 4. While Obama himself makes just $400,000 a year, the CEO spot includes perks such as corporate plane, helicopter and motorcade, as well as 24-hour security and a large house in Washington, D.C. He came under some criticism about the size and expense of the parties he threw after taking over the firm, as well as the hiring of his personal chef.
Obama’s comments caused widespread market disruption because the mega-corp impacts virtually every industry. Hope and Change went on an acquisition binge in recent months – both before and after he took the helm. HOPE took full control of mortgage giants Fannie Mae and Freddie Mac, as well as American International Group and a partial stake in General Motors, Chrysler and Citigroup.
Though his media popularity remained strong, Obama’s anti-investor views were criticized by some in the business press. CNBC’s “Mad Money” host told MSNBC on Feb. 2 that the new CEO was acting like infamous communist leader Vladimir Lenin “Let me tell you something, we heard Lenin,” Cramer said. “There was a little snippet last week that was, ‘Now is not the time for profits.’ Look - in Lenin’s book, ‘What Is to Be Done?’ is simple text of what I always though was for the communists, it was remarkable to hear very similar language from ‘What Is to Be Done?’ which is we have no place for profits.”
Obama’s “I screwed up” response to the initial problems was greeted by jeers in the investment community. Street sources indicate the stock could be in for a rocky ride if this kind of mercurial leadership continues.
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