Inside Washington's Headlines

by Ken Feltman

Radnor Inc.

April 2009


Legislative insight

Political intelligence










Ken Feltman is Chairman of Radnor Inc., a political consulting and legislative relations firm in Washington, D.C. He is past-president of the International Association of Political Consultants and the American League of Lobbyists.




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Washington: Trading doubts

I beseech you, in the bowels of Christ, think it possible you may be mistaken.

- Oliver Cromwell

Doubt is the great building block of truth. Over time, doubt roots out the mistakes, the arrogance, the false assumptions, the worthless remedies. Doubters play a critical role in getting to the right answer. Doubt, then, is not weakness but a surer path to truth.

When I wrote in January that Washington had become the financial capital of the world, I got few complaints. Most who commented expressed doubt rather than disagreement. But the doubters have come out of the woodwork in the last month, led by associations tied to the banking and automobile industries. This delayed reaction echoed the slowly escalating criticism that I received last year when I questioned the supposed advantages of ethanol: It took a while before the ethanol trade press and lobbying organizations struck back. But when they did, they really did.

Lawyers sent threatening letters and I got telephone calls from "friends," usually warning me that the ethanol lobby could hurt me. The ethanol folks had every right to play rough. Instead, they played dirty. That does not get to the truth. Ethanol's fortunes have slipped in Congress, due to the failure of the ethanol lobby's factual arguments and a backlash in Congress against the blunt force of the lobbying, not due to anything I wrote.

The banking, insurance and automobile industries have played fairly. They challenge my conclusions with thoughtful arguments. They leave the threats and intimidation out of it. The auto industry spokesmen are a little over the top, suggesting that if my "unprecedented" ideas are followed, the auto companies may be forced into bankruptcy.

Well, come now, the auto manufacturers don't need any help from me to go belly up. Just listen to President Obama. The Obama administration has been looking for a way to push the auto makers into bankruptcy. The failure of the auto companies to present realistic restructuring plans gave Obama the opportunity to deny the companies additional funds and to use the "b" word. Today, does anyone really doubt that GM is headed for bankruptcy court?

But Obama went further. He fired the CEO of GM and shook up the board of directors. Then he ordered Chrysler to merge. In so doing, Obama sent chills down the spines of CEOs at corporations throughout the United States and gave credence to my belief that Washington - not New York - is the financial power center of the U.S. and the world.

Today, Obama is not just the head of state of the world's largest economy and commander-in-chief of the world's most powerful military. Today, Obama is the most powerful corporate executive in the world.

What went on behind the scenes?

You can read about what happened elsewhere. But what about why things played out this way? A combination of arrogance, failure to accept a new reality and a personality conflict brought us here. An arrogant auto industry clashed with an equally arrogant federal government. Neither side seemed to consider that it could be mistaken.

Two weeks ago, rumors swirled around Washington that GM Chairman Rick Wagoner's arrogance and recalcitrance had exhausted Obama's patience. It had become personal between the two men. Wagoner could not accept the simple notion that in taking the government's money, GM and its executives would have to give up some independence. Wagoner, it was rumored, was incensed when members of Congress questioned the wisdom of the three auto industry CEOs when they traveled on three different private jets to Washington to plead for federal money. Wagoner believed that decisions about corporate aircraft were the province of corporate boards, not Congress. He let it be known that he would not consider jet-pooling on his next trip to Washington. Then he grumbled about being forced to travel to Washington in a GM luxury car because he does not like to fly commercial.

In short, he seemed more concerned over a perk of his office than about his new obligation to show some common sense and contrition. Obama took advantage of Wagoner's rigidity and showed that he has a remedy for clueless CEOs. Neither Wagoner nor Obama seemed to believe that he might be overreaching.

Just last week, a GM lobbyist told me that the Obama administration would "never dare to ask Mr. Wagoner to step aside." Yes, they would. A trader in New York who follows the auto industry said: "Don't kid yourself. Obama is all talk and campaign speeches. He doesn't have the right to remove anybody. He won't do anything." Yes, he would.

How could such a disconnect exist? Detroit and New York failed to see it coming but folks in Washington figured it was a question of which CEO would become an example for all the others. Wagoner and his arrogant advisors put the GM CEO at the top of the list.

As in so many situations where powerful egos clash, a clear pattern of behavior forecast the likely endgame. Earlier, out-of-town banking and auto executives - accompanied by teams of lawyers, lobbyists and public relations consultants - descended upon Washington hotels, restaurants and clubs. Rumors suggest that the culture clash started immediately. PR people shoved cash into the hands of maitre d's to secure choice tables in fully booked restaurants, dislodging a White House employee and her party at one trendy eatery. A large group from a New York bank seems to have consumed too much wine and some in the group became noisy. They jeered when a waiter asked if they might quiet down a bit.

A woman who has worked in the Senate for nearly three decades remarked that the entourage following one bank CEO seemed more like "fraternity boys from my undergraduate days." During a visit to the Treasury Department, the CEO of one of New York's largest banks suggested that his institution qualified for the federal assistance dedicated to minority financial institutions because over half the employees of his bank were female. Surveying the all-male delegation, a woman from Treasury asked, "which half?"

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If even half the rumors are true, what were they thinking? True or false, the rumors show that Washington is ready to believe the worst about the executives. For their part, the New Yorkers think that Washington is insular and provincial. A Washington political reporter told me: "They came to town and seemed to think that being 'big' was the most important thing, as if the operative word in 'big failure' is 'big.' "

A damaging impression left by the lobbyists and PR people - and by some remarks of the auto and banking CEOs - was that they felt no shared responsibility. The auto companies left the impression that government environmental and fuel efficiency standards and unions were more to blame than the auto companies themselves. The banks seemed to suggest that they were encouraged, even forced, to assume riskier investments. A Congressman summed up: "It was as of they (the companies) were just carried along by government regulations and demanding unions. They wanted us to think that they were the victims."

The initial interactions of the federal government and the newly governed were difficult, awkward, even crude. The elected officials were quick to grandstand for the voters and humiliate their new vassals. The former barons were slow to catch on. The truth was made clearer as the doubters came to understand that this is a different financial system in a changed country with opinionated political leaders. The change is so all encompassing that some will not grasp the full extent for years. But the simple fact is: The big decisions are now being made in Washington by Congressmen who have constituencies back home to please, and at the other end of Pennsylvania Avenue, by a White House guided by an old Chicago expression: Take advantage of every crisis. The White House is pushing many programs - healthcare reform, for example - with the hope that those programs will be enacted along with the economic packages. As White House staffers attempt to jam through legislation amidst the economic crisis, they justify heavy-handed tactics as necessary to remedy what they see as a crisis requiring intervention.

At least your warranty will be safe

The result is not dignified. We have a president who fired GM's CEO and then said that the government did not want to run GM. He did a sort of sales pitch for Buick. Next, he said that the government will stand behind GM warranties. Will that be a comfort for GM customers? Or will it seem beneath the office of president?

It may get worse before it gets better because the auto and banking industry folks seem to be very slow learners and the Obama people seem to be certain that they are right and, when aggravated, will take swift action to teach the former big shots the new facts of life.

We had a business class that, until they fell, had no doubts about their preeminence. Do we now have a political class that has few doubts about its power and the justness of the cause? Already, Obama justifies his actions with finger wags, irritation at probing questions and increasingly pointed words. He shows impatience that others do not understand. His chief spokesman says that it's all necessary.

Something else Cromwell said may be worth recalling: "Necessity has no law."

The bankers and auto executives had few doubts. They also had few answers to their industries' problems. Doubt a little more, Mr. President. You are the single most powerful man in the world and, arguably, the most powerful president ever. Doubt is not weakness.

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