WASHINGTON -- The economic crisis has helped make the federal government the nation's most powerful corporate shareholder. Now, President Obama is aiming to make sure that doesn't become a political liability.
A 60% government stake in General Motors "may give some Americans pause," Obama acknowledged Monday.
He pledged to make the takeover temporary. "Our goal is to get GM back on its feet, take a hands-off approach, and get out quickly," he said.
Some Republicans, meanwhile, are seeking to make political capital from a string of government acquisitions, including Chrysler as well as some banks and mortgage companies. "Does anyone really believe that politicians and bureaucrats in Washington can successfully steer a multinational corporation to economic viability?" asked House Republican Leader John Boehner of Ohio.
Business groups such as the U.S. Chamber of Commerce questioned whether a government-run GM could recoup a taxpayer investment now totaling $50 billion. Chamber President Thomas Donohue said the GM focus should be on selling cars, but that could be hindered by the "potential for governments and unions to influence production … and management decisions."
Former Bush administration spokesman Tony Fratto said Obama can't claim to be "hands-off" when he and his aides picked the new CEO of GM, and will select most of the board of directors. They might be tempted to follow the administration's wish to make smaller, more fuel-efficient cars — whether customers want them or not, he suggested.
In his remarks from the marble foyer at the White House, Obama said the government "will refrain from exercising its rights as a shareholder in all but the most fundamental corporate decisions." He said the company will decide such things as "where to open a new plant or what type of new car to make."
The government has taken "the unwelcome position of owning large stakes in private companies," Obama said, because the economic crisis shut down capital markets and put companies like GM at risk of liquidation. The president described the government as "reluctant shareholders."
The public is likely to back Obama in the short term, given the anger at business in connection with the economic crisis, said Michael Useem, professor of management with the Wharton School at the University of Pennsylvania. Useem also noted that many of these takeover plans were hatched during the Bush administration.
Down the line, he added, many people will want to return to business as usual. Useem said American society and culture "put a premium on private enterprise staying private."
It isn't just a question of how long the government maintains ownership, said Stan Collender, a partner in the Washington-based business consulting firm Qorvis Communications. It's whether GM — and other companies — can become successful enough to redeem the taxpayers' money.
That could mean Obama will be criticized whatever he does, Collender said. If he sells too quickly, some will say he should have waited for higher stock prices; if he waits, people will accuse him of staying in too long.
"The government's stake," he said, "will likely be sold in pieces both to demonstrate that the government wants to get out and so as not to depress the market."