"Far from eagerly micromanaging the companies the government owns, Mr. Obama and his economic team have often labored mightily to avoid exercising control even when government money was the only thing keeping some companies afloat.
"A few weeks ago, there were anguished grimaces inside the Treasury Department as the new chief executive of A.I.G., Robert H. Benmosche, whose roughly $9 million pay package is 22 times greater than Mr. Obama's, ridiculed officials in Washington — his majority shareholders — as ‘crazies.'
"Causing even more unease to policymakers, Mr. Benmosche insisted that A.I.G. — one of the worst offenders in the risk-taking that sent the nation over the edge last year — would not rush to sell its businesses at fire-sale prices, despite pressure from Fed and Treasury officials, who are desperate to have the insurer repay its $180 billion government bailout.
"But in the end, according to one senior official, ‘no one called him and told him to shut up,' and no one has pulled rank and told him to sell assets as soon as possible to repay the loans.
"A similar hands-off decision was made about the auto companies. Shortly after General Motors and Chrysler emerged from bankruptcy, some members of the administration's auto task force argued that the group should not go out of business until it was confident that a new management team in Detroit had a handle on what needed to be done.
"But Mr. Summers strongly rejected that approach, and the Treasury secretary, Timothy F. Geithner, agreed.
"‘The argument was that if the president said he wasn't elected to run G.M., then we couldn't hire a new board and then try to run any aspect of it,' one participant in the discussions said. The auto task force took off for summer vacation in July, and it never returned."
The political argument for this position makes sense. Basically, Obama and his administration are afraid of being charged with "socialism" or "big government," so they are doing what they can to defuse this charge. (Not that that will help given the way political rhetoric is thrown around these days.)
I'm not sure the policy argument makes as much sense. Think about GM, for example. The Treasury Department owns 60% of GM. In the private sector, if you were a private equity fund manager who owned 60% of a deeply troubled company, and you didn't play an active role in its reconstruction, your investors would accuse you of being negligent.
