The Obama White House and its allies, who have executed a political U-turn on domestic auto industry policies over the past few months by putting bankruptcy on the table, are also suggesting that executives from other industries could be replaced as easily as General Motors Corp.‘s chief was last week.
General Motors Corp. Chief Executive Officer Frederick “Fritz” Henderson, who was installed by President Obama last week to overhaul the ailing company, raised the possibility Sunday that the company would file for bankruptcy - a move opposed by the recently ousted former CEO and by labor unions.
Treasury Secretary Timothy F. Geithner said Sunday that bank executives could be replaced if they abuse the money being laid out by the federal government.
Mr. Henderson took to the Sunday talk show circuit to discuss restructuring General Motors, less than one week after he was tapped by Mr. Obama to replace oustered-CEO Rick Wagoner.
“We either accomplish this job outside of bankruptcy in the short term; or alternatively, if it’s necessary, we’ll go into bankruptcy in order to get this job done,” Mr. Henderson said Sunday on NBC’s “Meet the Press.”
“Our preference is to do it outside of a bankruptcy process, but it would only be prudent to make sure that we’re planning for if we need to resort to that, that we can move and we can move fast,” he said.
Mr. Wagoner had opposed bankruptcy to help pull the carmaker out from under crushing debt, negative cash flow and payroll and pension commitments. Democrats in Washington have equally pushed back against bankruptcy, which could easily undercut support for the party from labor unions who would likely suffer in such a bank filing.
Sen. Debbie Stabenow, Michigan Democrat, said bankruptcy is not an option.
“I do not support bankruptcy, certainly as the first, second or third options,” Mrs. Stabenow said Sunday on CNN’s “State of the Union.” “We have 600,000 retirees whose pensions, by the way, would become a federal liability in the worst-case scenario in a bankruptcy. We have retiree health care. People who gave up wage increases multiple times in order to make sure they had a pension and had health care. … So it certainly is not my first option. And I know that it’s not the first option of the administration.”
The White House and Democratic leaders had not been as hard on banking executives as they have been on auto company executives, critics have said.
Mr. Geithner raised the prospect that what befell Mr. Wagoner could just as easily go for banking heads if they squander their government aid.
“In the future, banks need exceptional assistance in order to get through this, then we’ll make sure that assistance comes with conditions, not just to protect the taxpayer but to make sure this is the kind of restructuring necessary for them to emerge stronger,” Mr. Geithner said Sunday on CBS’ “Face the Nation.”
“And where that requires a change of management of the board, we’ll do that,” he said.
Mr. Geithner, who has become a focal point of the national economic crisis, said the government will treat similarly Fannie Mae, Freddie Mac, American International Group and other recipients of bailout money.
“It’s a single standard, a single principle. And our obligation to the American people is to do what’s necessary to try to bring recovery back on track as quickly as possible,” he said.