Business Law Prof Blog

Congress and 401(k)s: Pensioners--Invest in TARP or Else!

Congressional leaders and Administration officials, frustrated with the amount of private money sitting on the sidelines in our economic crisis, will soon announce, according to unnamed sources inside the White House, a bill that requires all those who hold 401(k) plans to invest at least 25% of the remaining funds in those plans in the White House's new private-public partnership program that will buy bank's toxic assets.  The unnamed source stated that 401(k) pension plans had been given a "free ride" on the government's bailout plans and need to participate along with everyone else.  Those 401(k) plan holders that refused to invest would be jailed in Gitmo.     

In an unrelated development, the President has order GM to fire race driver Dale Earnhart,.Jr.  "He is a slaker who is not winning any races,"  the President is reported to have said.

What Ex-GM CEO Wagoner Should Have Said to Obama: "You Do Not Have the Authority to Fire Me"

When President Obama and his senior economic advisers decided that GM CEO Wagoner should be fired and this was communicated to Wagoner he responded incorrectly.  He should have said: " You are not my board and you cannot fire me.  I am going to stay until the board fires me."  Consider what a simple refusal would have done -- reasserted the separate roles of public and private industry. Then if and hen Obama had followed up with calls to the GM board, telling them to fire Wagnoer, the board should say: "We will take you advice into account but you do not bind the board, our primary allegiance is to our shareholder and, if insolvent, to our unsecured creditors."  In other words, Wagoner should have grown some cajonies.  And when the President asked Wagoner as he has asked his successor Henderson, to hire adminsitration embedded employees, Wagoner and or Henderson should have said no.  

On the merits of Wagoner's job performance, the board should have fired him because his "reorganization plan" was a joke.  Wagoner, in fashioning a plan, should have laid out significant haircuts to wages and debt repayments, even if the groups had refused to assent, and told the government to condition any bailout grant on their agreement.  If the groups then refused, GM declares Chapter 11.