Barack Obama, Activist Investor

His Administration has acted more forcefully than some expected or hoped in setting deadlines and overseeing U.S. loans to banks and automakers

President Obama speaks on the economy at Georgetown University's Gaston Hall in Washington, Apr. 14, 2009. Saul Loeb/AFP/Getty Images

By Theo Francis

With more than $200 billion invested in U.S. banks, another $70 billion earmarked for American International Group (AIG), and $30 billion in credit for automakers and lenders, President Barack Obama may well qualify as the nation's Investor-in-Chief. And he's proving himself about as activist as an investor can get.

Obama as good as fired Rick Wagoner, the now former General Motors (GM) chief executive, and gave the automaker 60 days to shape up or face bankruptcy. He gave Chrysler just 30 days to find a buyer—in all likelihood Fiat (FIA.MI)—or confront the same fate. (It looks like Chrysler CEO Robert Nardelli also will be gone once a deal is in place or Chrysler files for bankruptcy.) With more than a little help from Congress, Obama and Timothy Geithner, the Treasury Secretary, have clamped down on executive pay and other corporate expenses, demanded detailed reports from lenders, and are putting banks through stress tests to ensure they can survive a worse-than-expected economic downturn.

In the process, the Administration has come out more strongly, and more clearly, than many expected: The automakers received grim deadlines rather than the indefinite life support many expected would flow to keep workers employed. And how banks succeed at or fail the Administration's stress tests will, it turns out, be made at least partially public, rather than cloaked in secrecy to protect the weakest institutions.

Just Like Any Major Investor Would

At the same time, government officials are, by and large, avoiding the aggressive fiat many feared (and some on the left hoped for), sticking instead to the established levers of influence available to major investors: conditions tied to financing and board or management changes, among others. Whether this active but relatively moderate tack is a hallmark of the President's governing philosophy—or more a reaction to the financial crisis and unprecedented economic conditions he confronts—remains to be seen.

"They are responding to these companies the same way that anybody who is putting in capital would respond," says Nell Minow, editor and co-founder of The Corporate Library, an independent corporate-governance research and analysis firm.

"Whether you go to the U.S. government or to a private equity firm, or to your Uncle Max, the first thing they're going to do is say, 'O.K., but we want some changes,'" says Minow, who previously spent a decade as a partner in a shareholder-activist investment fund. "Given the sensitivity of their involvement, and given all the complications of working with companies and the Congress, I think they're doing pretty well."

Business Exchange

Track and share business topics across the Web.