By Theo Francis
It remains an open question whether the much-heralded "green shoots" truly signal a turn toward a U.S. economic recovery. What's clearer is that the business backlash against government is well under way.
Not so long ago, business and policymakers alike were calling for Uncle Sam to step in and stop the bleeding — in the financial sector, at the automakers, in the housing and job markets. Most of the sniping that occurred came as various government figures criticized one another for doing too little. Now, however, the grousing is shifting to arguments that the government is overstepping that subjective line between helpful intervention and harmful meddling, including in areas where business only recently welcomed Uncle Sam's dollars.
"They're making business decisions in a way that is political," John A. Allison IV, chairman of BB&T Bank, told BusinessWeek at a Beltway gala on June 11. BB&T was cleared this past week to return $3.1 billion in federal bailout money. "Where does it stop? The people making the decisions don't have the knowledge of the industries, of the institutions, to make good business decisions."
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Certainly, last week brought plenty of revelations about the government's role as an activist investor, both now and at the height of the crisis. The Treasury unveiled broad principles for executive compensation and backed legislation to give the Securities & Exchange Commission and shareholders more say in how compensation policy is shaped; it also appointed a "pay czar" to police compensation at the seven companies that have received repeated federal aid.
The Food & Drug Administration got the go-ahead to regulate tobacco as a drug. The Supreme Court stood aside, letting the Obama Administration's plan for Fiat to acquire Chrysler go through, despite arguments by some creditors that it stood on end the usual bankruptcy process. And the Administration's role became clearer in everything from picking board members and top executives to "changing the culture" of also-bankrupt General Motors.
On Capitol Hill, indignant lawmakers listened as Bank of America CEO Kenneth Lewis described the pressure he felt late last year at the hands of Fed Chairman Ben Bernanke and then-Treasury Secretary Henry Paulson to go consummate the acquisition of an ever-shakier Merrill Lynch.
So perhaps it should come as no surprise that the U.S. Chamber of Commerce — perhaps the business lobby's most persistent voice against government regulation — picked this week to launch its "Campaign for Free Enterprise." Declaring that "capitalism is at a crossroads," Chamber officials called the effort to "defend and advance America's free enterprise values in the face of rapid government growth and attacks by anti-business activists … one of the most important and necessary initiatives in [the Chamber's] nearly 100-year history." Two days later, the Chamber sent an open letter to Senator John Thune (R-S.D.) supporting a "transparent exit strategy to ensure the timely withdrawal of the federal government from these most extreme and unusual forms of intervention."
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The Republican Party of Florida put it a little more bluntly, headlining its criticism of the Obama Administration's forays into business (and some other issues) "Back in the USSR" and decrying that the Administration has more czars — over health care, autos, executive pay, and more — than did three centuries of Romanov rule. (Never mind that some of the U.S. czars date to GOP Administrations or that the Romanovs and the Union of Soviet Socialist Republics didn't exactly overlap.)
The Administration's approach has real dangers. Attempting to reorganize and tinker with the culture of a giant corporation like GM is risky in the best of times. Taxpayers may find themselves hopelessly entangled in lost corporate causes, with billions of loans never returned. Companies that are shackled with pay restrictions may lose top talent to those that aren't. Countless historical examples show the potential for unintended consequences from well-intended policies. (Just one example: the costly distortions in employee titles and pursuit of tax loopholes that followed imposition of government wage and price controls.)
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