President Obama's vision of the future is, apparently, an economy guided, steered and -- when the occasion demands -- commanded by the federal government. Some of the companies will remain private. Washington will take others over. But all will look to the White House, as to an orchestra conductor, for signals as to how and when and where to proceed.
This summary is the vision that emerges from the Chrysler bailout.
Whether or not one believes the claims of attorney Thomas Lauria (I do) that the investment bank Perella Weinberg Partners was strong-armed by the administration, the fact remains that the four firms that accepted the piddling offer of 29 cents on the dollar are all awash in TARP money.
Citigroup, Morgan Stanley, Goldman Sachs and JPMorgan Chase all dutifully approved the offer from Washington, while reportedly Perella Weinberg held out for 50 cents. Did the combined $90 billion the four compliant firms owed Washington in TARP funds make a difference in their passive acquiescence? You bet it did.
They shouldn't have said yes. Clearly, Obama was not about to pull the trigger that would send tens of thousands of autoworkers straight into unemployment. Politically, he would have had no choice but to cough up the $4.5 billion loan the feds just gave Chrysler with or without a debt settlement. The political pressures that have always operated on this Democratic president are still there and still in play.
Knowing the ultimate vulnerability of the administration position, any investment bank that was looking out for its clients would have demanded more than 29 cents. But Citigroup, Morgan Stanley, Goldman Sachs and JPMorgan Chase all had a higher calling -- to appease King Barack I. To its credit, Perella Weinberg put its investors first.
But this little vignette shows exactly what the new rules of the game will be under this administration. It won't be Soviet style socialism or Reaganesque capitalism. The system will more resemble the Japanese arrangement where MITI, the Ministry of Trade and Industry, informally guided companies and told them what to do. In Japan, a nod usually suffices to command. In the United States, one has to use a hammer. But the result will be the same: compliant capitalism.
Companies will not look out for their shareholders or their employees or even their customers so much as watch the smoke signals from Washington to decide what to do. The markets won't control decisions. Washington will.