As Overseer and Owner, U.S. Aims For Balance
Debate Intensifies As Federal Sway Grows at Firms

By Binyamin Appelbaum and Peter Whoriskey

 

 

The owner of a car company can decide how many cars to make, to paint red, to send to Maryland dealerships. The Obama administration, which plans to buy about 70 percent of General Motors, insists it does not want to be that kind of owner. Senior officials say they are focused solely on forcing critical financial repairs at GM and other companies in which the government plans to take large ownership stakes. They do not want to get dragged into the weeds of daily decision-making. But it’s not easy to keep hands in pockets. At regulators’ urging, Citigroup appointed a new chairman in January and added four former financial industry executives to the board in March. Regulators also have pushed the company to sell business units and to raise additional capital. The government’s stress tests found that Citigroup needed to add $5.5 billion to its cushion of common equity. But some experts caution that regulators are ill-equipped to represent the government’s interests as an investor. “It just isn’t designed to do this,” said Karen Shaw Petrou, managing partner at Federal Financial Analytics. “It’s another example of Treasury looking for a least-worst solution.”

 

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