Austan Goolsbee recently complained on television that they're only
embroiled in the auto mess because the Bush administration "kicked the
can down the road". Keith Hennessy, who was in the Bush
administration, says that's not quite how it happened:
the administration proposed a more definitive resolution process, but
the Obama transition team, which wanted more control over the process,
declined.
It seems to me that the Bush administration could
hardly have resolved things any more quickly than they did;
restructuring a company takes time. Nor did they have much political
scope for bold action. But perhaps my old professor was voicing my
secret suspicion: that the Bush administration only gave the
automakers loans because they wanted to leave the incoming Democrats
with an ugly, expensive, mess on their hands. If Bush had had a few
more years in office, he might simply have let the automakers fail.
But this way, he kept Michigan competitive, and forced the Democrats to
spend huge, unpopular sums on a fairly naked bailout of a key labor
constituent.
That would imply, of course, that like me, my former professor thinks GM should have been allowed to fail.
Copyright © 2009 by The Atlantic Monthly Group. All rights reserved.
An elected official should never "finish off" a business, unless that business is breaking the law.
The same hands-off policy applies to bailing them out.
If they are going to fail, let them fail. Bankruptcy laws are well defined and have stood the test of time.
Agree. Gummint has no business determining the fate of private sector business, except in BK court.
I refuse to do business with any business that took a bailout or TARP. Period. This sentiment is common across the country and will do in the whores sooner or later.
If Bush had had a few more years in office, he might simply have let the automakers fail. But this way, he kept Michigan competitive, and forced the Democrats to spend huge, unpopular sums on a fairly naked bailout of a key labor constituent.
Gee, you think?!?!? It's not like he ever gave a crap about the American worker. If they did fail and the economy got worse than it is now, I wonder what would have happened? Would he have told them, "Let them eat cake!!"?
How do you see the current solution helping whomever you mean when you say "the American worker?"
Who is this person, the "worker," anyway?
Are you saying that the engineers at GM don't work? Are you saying that a manager at Chrysler had an easy job?
Or what about the line worker, supervisor, manager, or even VP at Intel (or AMD, or Motorola, or TI, or Hughes, or any of the other tech companies) who are going to have to pay for all of this insane borrowing?
Doesn't Chauncey care about them? Don't their dreams of being able to afford tuition for their kids, perhaps a new car every 4 or 5 years, maybe a vacation now and again - don't those dreams count?
What makes the "workers" that you support more important than the ones that have to pay for this?
It also implies that Republicans intended on thwarting any progressive agenda Democrats might have with financial catastrophe; as in Krugman's NYT column on the UK and Brown today. How convenient that health care reform, global warming regulation, etc. should all fall victim to failing banking system, dropping housing prices, and non-competitive industrial sectors.
But I do hold Democratic law makers feet to the same fire.
Bush left Obama the option of bailing out the UAW. Isn't this what is commonly considered "progressive" (i.e. a return to failed 20th century policies)? So you're saying that Bush thwarted Obama by leaving him choices?
That's certainly how conservatives try to brand progressive politics. And Obama did ask Bush to save GM. Seems to me he's at least seeking a softer landing, though I have mixed feelings about things.
But your broader implication -- a century of "progressive" politics? We've not seen that; and had progressive values, instead of free-market values, been in practice, I'm not sure we'd be sitting where we are now. Remember, Reagan bailed out auto companies too, and worked for policies that allowed our gas-guzzling mentality to grow instead of shrink. Those may have been good for economic growth in the short term, but as a child of the 1970's era gas crisis, I can't think it was anything but short term gain. We saw the roots of many of our current problems then, ranging from our current war over resources in Iraq to what turned into the potential for cataclysmic climate change then, and opted to ignore them; and there's plenty of blame for both parties.
Can you be more specific about "progressive values"? What type of system do you have in mind? "Free-market values" means that the government sets the rules and acts as a neutral referee to enforce those rules, rather than picking winners and losers and "redistributing" freely based on whim, corruption or whatever. Can you explain the system you prefer - that the government is free to grab anything from anyone, at any time, as long as it says it's doing it for the sake of the 'cause of the day' such as global warming, global cooling or whatever else someone dreams up to win grant and donation money?
Any thought as to why people might want to "thwart" that agenda you mentioned?
It's all the same ball of wax: the economy can only afford what the economy can afford.
I've yet to meet the person who didn't believe that it would be fantastic if every person lived exactly where they wanted, exactly how they wanted, with exactly whom they wanted, etc. Nirvana.
Who opposes the all-things-to-all-people dream? Nobody.
The trouble is, real life doesn't work that way. In fact, this is what *started* the whole "financial catastrophe" that you mention, remember? We told a whole lot of people who had no clue what was involved in owning a house that credit was a civil right, and then lent them hundreds of thousands of dollars.
Again, and again, and again, and again.
If this wasn't all things to all people, what was?
But blame Republicans. Yeah, they invented the laws of physics, too. If it wasn't for them we could all float home...
No, I don't agree.
It started when insurers at AIG thought they'd found a way to eliminate risk in housing loans.
Ain't no such thing as a free lunch. But just like there's good business, there's also good social investment. Combining both, in my mind, should be the goal.
No, as RobM1981 said, the problem began with the Clinton administration first forcing (through the change in CRA to a quota system, among other changes) and then bribing (through Fannie and Freddie) banks to lower their lending standards. Once the banks got used to the lower standards - smaller and smaller downpayments, lower credit scores, etc. - they got carried away and applied them to everyone, whereas politicians such as Barney Frank had only meant the lower standards to apply to their special interest constituents, since their goal had been to bribe constituents with the banks' money (is that what you mean by "good social investment"?). When a doctor literally forces a patient to use an unnecessary and highly addictive drug, that doctor bears part of the responsibility for the addiction.
Barney Frank played a big role in coercing Fannie and Freddie to lower lending standards on mortgages, and now Frank is putting pressure on GM regarding which facilities to leave open.
Ann,
Thanks. And there is plenty of blame to go around, if that's the game. There's no denying Phil Graham's role, or Andrew Cuomo, or even George W. Bush.
Did the banks act like sharks, once they tasted blood in the water? Of course. They're banks. It's what they do.
Which makes it all the more unforgiveable that Bill Clinton, Barney Frank, etc. all walk away from this social experiment debacle.
Facts are facts, and this whole thing started for precisely the reasons we outline here. Any other rendition of the past is, charitably, a fantasy.
Thank you, Rob. There is plenty of blame to go around.
Now when are we going to stop blaming and start solving?
The answer is as ugly as it is certain:
In general, taxes must be frozen. Cut would be better, but a freeze in-place is more practical.
Spending must be cut to match expenses within 18 months. This is going to happen one way or the other, as we now see in California. Better to do it with a semblance of control than desperation.
Important: the government accepts TARP money back, sells its GM stock on the open market, etc. No more government run companies.
Important: stop threatening to tax oil, or subsidizing crazy schemes to turn toe clippings into rocket fuel.
The one tax cut we need: small businesses. Any business grossing less than $5MM/year is exempt from US Corporate Income Taxes. Moreover, any state taxes are deductible as rebates (you know, sort of like we do for people who don't pay taxes but get "refunds") at 50 cents refunded for every dollar paid. At $5M a company loses the refund and starts paying taxes at a graduated rate that doesn't reach the current level until the company goes beyond $25M in revenues.
This applies to every business type. Nobody is incented for opening a specific type of business. Let human ingenuity and drive do what it has always done and stoke the well being of the overall economy.
Fiscal libertarianism works. It always has. The government's role is to keep the playing field level.
You've got some good suggestions, RobM1981.
As for spreading the blame, I'll go a step farther. We shouldn't just blame the politicians such as Barney Frank or Phil Graham or Andrew Cuomo or Bush - we should blame ourselves for alowing such a system, and for not doing a better job of monitoring our politicians. Think of it - Barney Frank, after what he did with Fannie and Freddie, is now meddling with GM! Where's the outcry? Should we blame Barney for being able to see that it's cheaper for him to bribe his supporters with our money, or should we blame ourselves for giving him the money?
The best way to get rid of corruption is to not allow government to pick winners and losers. Setting up a system where politicians micro-manage businesses is asking for massive corruption, distortions and problems. We got into this financial crisis originally by allowing politicians to meddle directly in business (i.e. bank lending) decisions, using stockholder as well as taxpayer money to buy votes for politicians. Now we're trying to fix our problems by putting more corruptive power into the hands of the very same politicians. How does that make sense?
To ANN:
You make an argument that is fashionable on the right wing, but wrong. Read http://www.slate.com/id/2201641/
To RobertRays -
I hoped that you had an article that actually dealt with the facts and substance of this debate, but instead it's a pointless (although colorful) article that focuses on name-calling and ridicule. Laughing at a claim doesn't refute it.
To look at where it started, let's look at when things happened. Here's the most substantive quote from the article you linked to:
"the dumb-lending virus originated in Greenwich, Conn., midtown Manhattan, and Southern California, not Eastchester, Brownsville, and Washington, D.C. Investment banks created a demand for subprime loans because they saw it as a new asset class that they could dominate."
As I've already pointed out, Fannie and Freddie built the subprime loan market virtually single-handedly in the 1990s, with other banks only jumping in and becoming dominant after 2000. How does that fit the claim that "investment banks" somehow created this market?
Similarly, Clinton changed the CRA to a quota system in the 1990s, literally forcing banks to lower their standards to meet their quotas. Janet Reno explicitly told banks that consistent lending standards would not be accepted as an excuse for failing to meet quotas - in other words, if prudent lending standards are holding back loans to targeted groups, those standards must be lowered.
The Slate article's entire logical argument is that, by the end, the lowered standards had spread to more than just the groups targeted by Clinton and Frank. That's true, as I've said many times, but it doesn't change the fact that it was Clinton, Frank and other (mostly Democrat) politicians that drove the initial lowering of lending standards. I never said that they were 100% responsible (far from it!), only that they initiated the changes that led to these problems.
Government meddling in business decisions for political purposes began the financial crisis. This is important to recognize because we're now trying to solve the crisis through more politically-motivated meddling by some of the exact same politicians. We're doing to GM and Chrysler what we did to Fannie and Freddie - expecting business decisions to be based on the political preferences of certain politicians. Politicians should not be micro-managing businesses - they don't have the knowledge, and they have very, very, very bad incentives. We need better regulation of the financial markets, not more power put into Barney's hands.
GM *WAS* allowed to fail. It's just not been allowed to die.
The more relevant question is how long the government will keep it on life support at the expense of billions and billions of continued government buck transfusions.
I've not heard a believable argument made that either GM or Chrysler can be operated as a normal going concern any time in the near future.
Makes a nice juxtaposition for controlling health care costs, doesn't it? Here we have the government going to extravagant expense to keep alive a patient with, as far as I can tell, little chance of survival beyond the moment the plug is pulled.
This happens when nations give corporations the rights of individuals.
Interesting point. To stop GM from failing, the government would have had to purchase their cars.
It would have been an interesting twist on things. Imagine Obama with several hundred thousand Chevy's.
"Sorry, Somalia, no flour this year. But I have some good news... A NEW CHEVY CAVALIER FOR EVERYONE!!!"
;)
Haven't those people suffered enough?
Of course, President-elect Obama was calling upon Bush to not let the auto companies go bankrupt at the time. Perhaps Goolsbee is saying that that was just politics, like Obama's calls to renegotiate NAFTA (though those words have helped lead to serious problems with Canada and "Buy American," even if repudiated now), and the Bush should have let the companies fail and let Obama blame Bush publicly for it while thanking him in private.
Sure, the can was kicked down the road a bit, and I would have been happier to let them fail. But it was impossible to structure a bankruptcy in that time, and the President-elect publicly called on Bush to kick the can. If Obama really didn't mean that, perhaps he could have tried being honest.
I also think GM should be allowed to fail, but given that managing the economic crisis was a key point of Obama's election campaign, you'd think "kicking the can down the road" would be a good thing -- now the group of people Obama and Goolsbee feel are better at handling economic issues will be, well, handling it. I can see how an anti-Bush Republican or libertarian could make this argument, but I don't see why a Democratic administration member is.
His line should be: "Wow, I'm glad the Bush admin didn't take try to fix this, because they would've screwed it up, like everything else they did."
It seems to me the Obama administration should be grateful to Bush for kicking the can down the road. This way, they've had several months to prepare for the bankruptcies and the general state of economy seems less dire. Would they rather have had to deal with the consequences of the bankruptcies from their first day?
This way, they've had several months to prepare for the bankruptcies and the general state of economy seems less dire. Would they rather have had to deal with the consequences of the bankruptcies from their first day?
Less dire? Does that mean happy days are here again? Or does that mean it is in intensive care instead of on life support?
Dude, vallium. Seriously.
I had respected Goolsbee before that performance, but on Sunday, he sounded like a cheap partisan hack. His performance was consistent with Obama's whining, beginning with his first day in office (just count the number of times Obama used to use the word "inherited", but only about bad things, of course, never about the improved situation in Iraq, thanks to the surge that he inherited). It was especially bad that Obama spent so much time whining, given that he was fully aware of the financial situation before the election and actively lobbied to be put in charge.
Obama finally seemed to be moving on, but perhaps their polling numbers have simply shown that the public whining should now be done by flunkies like Goolsbee. Goolsbee's point was 'hey, at least we got more concessions out of the UAW than Bush did, so in comparison, we look pretty good!'
Here is a response to Goolsbee by one of Bush's economic advisors.
It includes: "At 3:30 pm on Sunday, November 30, 2008, a quiet meeting occurred at the Treasury Department in Secretary Hank Paulson’s office. Present for the Bush Administration were Treasury Secretary Paulson and Commerce Secretary Carlos Gutierrez, White House Chief of Staff Josh Bolten, Deputy COS Joel Kaplan, White House Legislative Affairs chief Dan Meyer, Treasury Legislative Affairs head Kevin Fromer, and me. Present for the incoming Obama Administration were Deputy COS-designate Mona Sutphen, NEC-designate Dr. Larry Summers, Dan Turullo (now a Fed Governor), and WH Legislative Affairs-designate Phil Schiliro. We had requested the meeting. They agreed and asked that it be held outside the White House. It appeared to us that they were quite concerned about leaks, and about the risk of creating a public impression that they were working closely with us...........
Dr. Goolsbee was not in this meeting. I do not know if he was aware of it, either back in November or this morning.
Despite multiple efforts to get the Obama team on board, they did not take up our proposal, nor did they suggest any modifications. At the end of that week we gave up on that approach and began to negotiate a bill with Speaker Pelosi, Chairman Barney Frank, and Chairman Chris Dodd that would provide bridge loans from previously appropriated non-TARP funds. Senate Republicans blocked that bill. Congress adjourned for the year and went home. In the last week of December, GM and Chrysler told us they would file under Chapter 11 in early January if they did not get loans from the TARP. They also told us, as did countless outside experts, that they were not ready for such a filing, and that Chapter 11 would lead to near-immediate liquidation. We estimated that about 1.1 million jobs would be lost if this happened."
http://keithhennessey.com/2009/06/07/dr-goolsbee-gets-it-wrong-on-the-auto-loans/
Gee, you mean Goolsbee is a lying partisan hack?
Shocking. Hard to believe that anyone in the Obama administration is a lying partisan hack. Obama is a God (as Newsweek's Evan Thomas told us!), and his administration is filled soley with angels. Goolsbee must have slipped by them somehow.
I'm no Bushbot, but Bush had no choice but to save GM. (Chrysler is debatable, but GM was a given.) The markets clearly had not adequately priced a GM failure into the broader indexes, given the shock as the news came out, and it was unclear what would have happened with the CDS had such a failure occurred. A bankruptcy last fall could have well sparked Great Depression II.
The Lehman failure was a wake up call that a hands-off policy wasn't going to work. Treasury clearly didn't expect the markets to respond to Lehman as it did, and despite any good intentions, the decision to let them fail proved to be a mistake. It's because of that incident that outright failure is no longer considered to be an option for either the large banks or the auto makers.
If GM fails a year or two from now, it probably won't matter. But late last year, the timing would have been catastrophic. Goolsbee is being disingenuous here, but so have been the Republicans. (I love how Bob Corker was fighting to kill off the bailouts...until it came to saving the Saturn plant in his state, so what's new here?)
And how do you think GM and other like enterprises conduct themselves now that politicians and some in the public think failure is not an option?
Does it encourage them to be more conservative with their finances? Do they slash budgets across the board to turn around the financial state of things?
Or do they proceed along as usual as if little has changed.
Companies should fail. Value labor, equipment, capital will be better used elsewhere. Dragging things out only prolongs the pain.
And how do you think GM and other like enterprises conduct themselves now that politicians and some in the public think failure is not an option?
There's no difference. They were incompetent and greedy before, and they remain incompetent and greedy.
If a lack of oversight was so terrific by nature, then we wouldn't have needed to do all of this stuff in the first place. Government can't fix human nature, it can only try to find better managers to replace the dolts who created this situation.
Do they slash budgets across the board to turn around the financial state of things?
GM has some of the lowest costs in the business. The problem isn't with the costs, but with their revenue. If anything, the emphasis on cost cutting was a central part of their failure, because they prioritized reducing expenses instead of pleasing the customer.
If GM is going to turn around, it is going to need to sell fewer, better cars at higher prices, and gain enough brand loyalty that they can sell more cars in the future. They cannot cut their way to prosperity. They tried that strategy for 30 years, and it didn't work.
Dragging things out only prolongs the pain.
That's honestly cliche and means nothing. When we tried it your way in the past, we ended up with the Great Depression, the Long Depression and all of the other depressions that the US economy used to have before we became a bit more management-oriented.
Can you point me a similar situation we tried to let a company in the situation of the auto companies fail during the Great Depression?
> The problem isn't with the costs, but with their revenue
>going to need to sell fewer, better cars at higher prices,
If this is government policy, god help us.
Derek
Goolsbee should be ashamed to make statements like that. If the Bush Administration had let GM and Chrysler go down just before Obama took office, he would have been crucified by every single mouthpiece of the incoming administration, including Goolsbee; and, what does Goolsbee think Obama is doing right now with the very same companies? Not kicking the can down the road?
I really don't know how anyone can defend statements like Goolsbee's.
Yes, Bush should have let them go down in December- there is no defense for what Bush did, but to publicly condemn Bush for doing exactly what Obama would have done is hypocrisy of the highest order.
Obama might or might not have done it, but he certainly publicly called up Bush to save them. Perhaps Goolsbee is right that Obama (and certainly Goolsbee) secretly wanted Bush to let them fail, even as they publicly called for the auto companies to be saved.
I guess we're not supposed to pay attention to "just words" after all.
Keith Henessey (and others) defend the automaker bailouts on the logic that allowing them to collapse in an uncontrolled fashion would have had catastrophic results for the economy. In my view, the question is more properly phrased as: did the short-term gain offset the long-term harm? The tens of billions loaned to GM and Chrysler (with more certainly on the way) are very unlikely ever to be recovered, so this money is now tied up and cannot be used to help the economy in other ways.
I think the basic problem is that too many people view the automakers as jobs programs rather than profit-making industries. It's been abundantly clear for many years that the American auto industry was headed for a Biblical reckoning; workers, managers, and other principals of the car industry have no one but themselves to blame for not heeding the warnings. American taxpayers have been forced (pretty much at the point of a gun) to pump money into these failed industries simply to keep the jobs intact. I'm not sure how this is any different than simply giving the auto-workers welfare: we're paying them to stand around, or to make stuff that no one (apparently) wants to buy. Why not simply do away with the pretense and send checks directly to auto workers while they train for other jobs?
GM and Chrysler are not failing businesses; they are failed businesses kept afloat by government largesse. Given the competitive landscape, it is highly unlikely that they will ever be viable, and thus any further "investments" at this point amount to throwing good money after bad. That this money is basically welfare for auto workers doesn't make it go down any easier -- most private-sector workers do not receive this kind of gratuity, even though their own tax money is being chivvied from them to provide it to someone else.
Count me as one of the people who will never buy another GM or Chrysler product. Never. I refuse to reward this kind of ineptitude and dirty-dealing with any more of my money.
If you take Goolsbee at his word, then he isn't arguing that Bush should have let the auto companies fail back in November 08. Instead, he's arguing that Bush should have enacted the current Obama plan, with its "tough concessions" from unions and other stakeholders.
I don't think you can take him seriously - after all, Obama got the car companies in January 08, and it took him 4 months to come up wit Chrysler plan and 5 for GM - there's no way that Bush could have forced those companies into structured bankruptcies in December 08, particularly when the unions would be well-advised to wait until Obama comes in and hope for a better deal than Bush would give them.
So yeah, Bush arguably should have forced the two companies into full liquidation bankruptcies, but I doubt Goolsbee would be any happier today.
Goolsbee's quote:
Here's Keith Hennessey's response to Goolsbee, for anyone who hasn't seen it.
As a taxpayer, and a Republican, I feel perfectly comfortable saying that Bush screwed up by giving TARP money to Chrysler and GM. He should ahve let them go belly up.
Given that President elect Obama was calling on President Bush to make those "loans", and that President Obama has continued giving them TARP money, no Obama supporter, let alone a member of his Administration, has any grounds for complaining about what Bush did.
Me likes a good rivalry. But neither Bush nor Obama are responsible for the mess. When a patient comes into the ER and the doctors fail to save him...
What if the patient is actually a corpse that's been dead for a week with a bunch of dependents? Do you spend billions attempting to bring the corpse back to life because someone depends on it?
Sam
You are right. The patient in this case was a vegetable when he came in. No brain function - only a body. It is not right to treat him as resources are limited and should be spend on those who have a real chance. Still - we know that many people keep human vegetables alive for nostalgic reasons. But come on - it is not like we have given GM similar amounts of money that rich factory farmers get every year with or without recession.
Your old professor is adjusting very nicely in his switch from honest economist to deceivin', cheatin' politician.
Here we saw him use a standard politicians' rhetorical ploy: upon being asked a question to which you have no good answer, respond with a non-sequitor attack on someone else that starts a dispute that distracts everybody from the question....
Wallace asked:
Goolsbee had no answer to that question that doesn’t look very bad: “We are going to maximize profits first, selling big cars if that’s that what it takes”, gets half of his own party infuriated at him ... “We are going to put our green hobbyhorse first over profits even if it costs the taxpayers $50 billion” gives Republicans a cannon to shoot.So ... the answer he gives is: Look at the damn mess the Bushies left us! "We are only in this situation because somebody else kicked the can down the road, and that’s really an understatement. They shook up the can, they opened the can, and handed it to us in our laps...".
And that's what's been argued ever after -- in the Fox News discussion, at Hennessey's blog, here -- and it does Obama no harm at all.
Does anyone see, anywhere, any further discussion of the actual question Wallace asked? The answer to which would have hurt Obama, whatever it was?
Good work, Austan! You may have a future career as a politician yourself.
(Though don't anyone kid yourself that this rather obvious question wasn't anticipated and the answer prepared.)
And bad work, Chris Wallace, who should have followed up with: "Well, that may all be entirely true, but let's get back to the question I asked you...
Wallace, like most reporters pleased to see a fight, was probably excited to hear one official bash on another. Although you'd think with Bush it would be old news by now...
Maybe they should start wording future questions as, "Other than being caused or exacerbated by Bush's policies, what do you think of..." or "Notwithstanding how evil and bad Bush was, what should we do now that you're in charge to..."
Let's just take it as a given that Bush=bad is present on both sides of the equation so we can cancel it out and get to their actual response or solution.
Can you point me a similar situation we tried to let a company in the situation of the auto companies fail during the Great Depression?
Companies failed quite nicely without any help during the Great Depression.
Forgive me, but I think that the objective is to avoid repeating the mistakes of the Great Depression, rather than going out of our way to fail. Hooverism didn't work then, and it isn't going to work now.
One could think the kicking of the can happened much earlier, with a general lack of oversight that resulted in needed action (rescue or "let fail")by the end of last year.
There is virtually no way that Obama would have wanted Bush to "handle" the situation at the last minute, because whatever happened after that would leave Obama subject to blame; if you are going to be blamed, you want to have a hand in the situation. But the can kicking did not begin last year. It was the long term fixation on overseas threats at the expense of everything else that let the situation reach a head.
Should they be allowed to fail without action? Probably, as car companies are not necessary to the economic system like functioning financial firms are. But aside from onlookers on the side--blog posters and commenters, professors, radio show hosts: all of whom like to propose doing nothing--no president left or right would have let GM go down without some action.
The better discussion should be more forward looking. Will the companies (Chrysler/GM) be able to make a go of business given contradictory goals (profit versus environmental efficiency) that must somehow be harmonized.
Shenanigans: presidents meddling, via Wiki:
"On Sunday afternoon and into the evening, Morgan, Perkins, Baker and Stillman, along with U.S. Steel's Gary and Henry Clay Frick, worked at the library to finalize the deal for U.S. Steel to buy TC&I and by Sunday night had a plan for acquisition.
But, one obstacle remained: the anti-trust crusading President Theodore Roosevelt, who had made breaking up monopolies a focus of his presidency.[54]
Frick and Gary traveled overnight by train to the White House to implore Roosevelt to set aside the principles of the Sherman Antitrust Act and allow—before the market opened—a company that already had a 60% market share to make a massive acquisition. Roosevelt's secretary refused to see them, yet Frick and Gary convinced James Rudolph Garfield, the Secretary of the Interior, to bypass the secretary and allow them to go directly to the president.
With less than an hour before markets opened, Roosevelt and Secretary of State Elihu Root began to review the proposed takeover and absorb the news of a potential crash if the merger was not approved.[55][56] Roosevelt relented, and he later recalled of the meeting, "It was necessary for me to decide on the instant before the Stock Exchange opened, for the situation in New York was such that any hour might be vital. I do not believe that anyone could justly criticize me for saying that I would not feel like objecting to the purchase under those circumstances".[57]
When news reached New York, confidence soared. The Commercial & Financial Chronicle reported that "the relief furnished by this transaction was instant and far-reaching".[58] The final crisis of the panic had been averted.[59]"
Presidents, under pressure, will always do stuff.