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EPILOGUE

SHINY NEW GM celebrated its first birthday on July 10, 2010, a month after the first anniversary of the reconstituted Chrysler. As hard-nosed realists, all of us on Team Auto have been, for the most part, reassured and relieved by the generally good news from Detroit since those important anniversaries. General Motors and Chrysler continue to pay their workers and are gradually adding shifts as they sell more cars. The unemployment rates in Michigan, Indiana, and Ohio, while still painfully high, have begun to edge down. We remain proud of the work that got us to this point, a mission that was not designed to further a particular economic theory, serve anyone's ideology or political party, or make anyone a buck (beyond the companies and their workers). So devastating were the possible consequences of this crisis that we were impelled to push ourselves, to question and requestion, to look at each decision from every possible angle and perspective. We were scared enough to stay focused on one and only one objective: getting it right.

To be able, on August 18, 2010, to pick up General Motors's newly filed 734-page IPO prospectus was for me an emotional moment. This thick legal document symbolized, like no other development thus far, the transformation of so-called Government Motors back into General Motors. Page after page of figures told the story of a remarkable turnaround. The decision to move forward with this public offering was the strongest and most telling indication that the U.S. Treasury will recover most if not all of the $82 billion the American taxpayer staked on overhauling Detroit.

Let's pause to run the numbers. Here's where the $82 billion went:

Reason	Company/Program	Amount Invested (billions)
Emergency funding before restructuring	GM	$19.4
Funding at behest of Team Auto for reorganization under bankruptcy	GM	$30.1
Emergency funding before restructuring	Chrysler	$4.0
Funding at behest of Team Auto for reorganization under bankruptcy	Chrysler	$8.1
Emergency funding in January 2009 to allow Chrysler to continue making auto loans	Chrysler Financial	$1.5
Emergency funding in December 2008	GMAC	$5.91
Funding at behest of Team Auto to recapitalize the bank	GMAC	$11.82
To maintain consumer confidence as GM and Chrysler reorganized under bankruptcy	Warranty Program	$0.6
To strengthen supply chain as GM and Chrysler reorganized under bankruptcy	Supplier Support Program	$0.43
TOTAL		$81.8

1. Includes $0.9 billion loan to GM for GMAC rights off ering on January 16, 2009.

2. Includes $0.5 billion loan to Chrysler for GMAC loss share agreement.

3. Actual size of the Supplier Support Program was $5 billion. Given the general success of the program, a much lower amount was needed to stabilize the supplier base.

Assessing what the taxpayer has gotten in return is more complicated. GM's value won't become clear until after the IPO, when the stock will be publicly traded and the market sets the price. As of August 2010, the best proxy is the trading level of old GM bonds, to which we grudgingly allocated 10 percent of the equity of Shiny New GM (along with some warrants). By that measure, the value of Treasury's 60.8 percent ownership of GM is approximately $31 billion. Adding to that the $6.7 billion of debt that GM has already repaid, and $2.1 billion of GM preferred stock, brings the total to nearly $40 billion.

This is $10 billion more than the $30 billion the United States injected into GM at the time of its bankruptcy fi ling as a result of Team Auto's work. But it's roughly $10 billion short if you also count the emergency $19.4 billion spent by the Bush and Obama administrations to prop up GM before Team Auto came on the scene. I view that $19.4 billion as lost money—a cost of the delays due to the presidential election, the transition, and the doctrine of "one President at a time."

Question marks remain regarding the smaller but still significant commitments of taxpayer dollars to Chrysler and GMAC. I've described the heated debates in the West Wing and at Treasury about Chrysler; Team Auto always knew that asking the Treasury to infuse another $8 billion into this hollowed-out, North-America-only player was a risky call. I was delighted when Chrysler notched two successive quarterly operating profits in the first half of 2010. But until we see sales results from new products due to appear in dealers' showrooms in late 2010 and beyond, we cannot know whether our surgery saved the patient.

Meanwhile, the auto loan portfolio belonging to GMAC (which had changed its name to Ally) performed well throughout, just as we had assured the FDIC it would, even as the company continued to unwind its terrible mortgage portfolio. The trading levels for Ally bonds indicated that the market viewed the company as solvent, although not without risks. Nonetheless, the value of the $11.3 billion of TARP equity was still not clear.

So predicting with any accuracy how much of the $82 billion of bailout money will ultimately be recovered is a difficult exercise. If the return of the government money were managed as it would be in the private sector, I believe the government would have a very good chance of getting back all of its money, including the early bridge financing. But with the White House justifiably eager to be out of the auto business, premature exits may occur. If we ultimately lose $10 billion or $20 billion on the auto rescues, that seems a small price to pay for averting a major economic calamity in the industrial Midwest and helping keep the national economy from spiraling from deep recession into outright depression.

President Obama was well justified during the summer of 2010 to take a series of victory laps, visiting plants belonging to each of the Big Three as well as smaller facilities working toward next-generation vehicles. "We are moving in the right direction," he said on a July 30 visit to Detroit. "The trend lines are good." Indeed, in the time since GM and Chrysler completed their restructurings, the auto industry added 76,000 jobs, a remarkable turnaround from the 460,000 that had been lost in the year before their bankruptcies. Summer shutdowns were canceled for some plants and shifts were added at others. I thought of the faces of the rank-and-file workers whom we saw on our trip to Detroit, and felt proud of the improved job prospects that we had provided them.

I could not help but be struck by the change in mood from the dark winter days of 2009 when I despaired over the seemingly impossible task before us. Respected publications like the Economist heralded the outcome. "Rising from the Ashes in Detroit," was the headline of one story in August 2010. The subheading read, "General Motors' return to the stock market heralds a remarkable turnaround for America's carmakers." If anyone had predicted at the start of our work that by the summer of 2010 the auto bailout would be one of the clearest successes of tough presidential decisionmaking, they would have been derided.

Even so, the auto rescue effort continued to take flak. Senator John McCain, for example, said in November 2009: "I don't think we ever should have bailed out Chrysler and General Motors. We should have let them go into bankruptcy, emerge, and become viable corporations again."

This is the kind of posturing that makes me reluctant to want to return to Washington. McCain, a bright and experienced man, had to have understood the enormity of the crisis the automakers faced at that dangerous juncture in our history. But he turned the debate political with a sound bite that served not to educate anyone but only to encourage narrow-minded listeners in the kind of misunderstanding that will ultimately do no one any good. Had he learned nothing from the debates of spring 2009 about bankruptcy or the state of the financing markets? We were lucky to have been given the opportunity to find the right course of action for Detroit and then follow it.

More aggravating than McCain's wild ruminations was the second-guessing from people who should have known better. For example, in July 2010, the special inspector general for TARP released a report arguing that Team Auto had erred in pushing GM and Chrysler to accelerate the pace of dealer closings. Dealers again!

The report was ludicrous. Every responsible auto industry expert agreed that the dealer networks needed to be shrunk, the quicker the better. Not only did we never get involved with which dealers to close, but also we never dictated the number of dealers to shutter. What we did do was try to inject a note of urgency and intellectual rigor into the companies' analysis, particularly that of GM.

While I remain proud of how many decisions we got right, especially in light of the need for instantaneous action, I do have a few second thoughts (what on Wall Street we call buyer's remorse). I wonder in particular whether we achieved enough of the shared sacrifice that President Obama called for from the auto industry stakeholders. More sacrifice, of course, would have benefited the government, yielding greater confidence in recovering all of its $82 billion, perhaps even a well-deserved profit.

For all the Chrysler lenders' theatrics about the boot of government on their throats, the $2 billion that we ended up paying for their $6.9 billion claim was probably double what they would have extracted from a liquidation. Similarly, I wish we had avoided the crazy math that led us to give 10 percent of the new GM (plus warrants) to the old GM bondholders. They now stand to recover 35 cents on the dollar from claims that should have been worthless.

And I brooded about the UAW, struggling with the good questions posed by Chuck Lane of the Washington Post at our editorial board meeting there: Why didn't we ask active UAW workers at GM and Chrysler to take a pay cut? Why didn't we modify both companies' overly generous pension plans?

Several reasons, I ultimately concluded. First, we had met the specific test of the Bush loan agreements, that total compensation to UAW workers be competitive with the transplants, even though we had allowed the UAW to maintain its policy of protecting the existing workers at a huge cost to the $14-an-hour new hires. Second, as in every negotiation, we could succeed only if the parties met somewhere in the middle. If we'd pushed too hard—for example, by taking on the much-needed reform of both companies' pension plans—the UAW might well have walked off the job. Third, we were pressed for time. And fourth, while having the power and the money of the government behind us was an enormous advantage, it also probably led to a somewhat kinder outcome than a purely private restructuring would have done. Restructurings in the take-no-prisoners world of Wall Street are bloody fights over the wreckage of insolvent companies; taking it all the way with GM and Chrysler could have involved trying to break the UAW and crushing the creditors into the minimal recoveries that they deserved—steps that we believed unimaginable for the Obama administration.

I spent many hours revisiting our toughest decision, to save Chrysler. The company was moribund; under almost any other economic circumstances, I would have been among those arguing to let it go. Diana Farrell was surely right that government should not be in the business of saving losers. Austan Goolsbee was equally correct in his assessment that the long-term consequences of a Chrysler liquidation would be relatively minor. And Harry Wilson was spot-on in his calculation of how much Chrysler's demise would have boosted GM and Ford. But I believed then, and feel even more strongly now, that Chrysler has a very good chance of succeeding, particularly with Sergio Marchionne at the helm. In that context, at the critical moment, when we all felt as if we were looking down a bottomless black hole, the President surely made the right call.

The auto rescue succeeded in no small part because we did not have to deal with Congress. Before taking up my post, I didn't realize how important this would be. I went to Washington thinking I understood the strengths and weaknesses of our legislative branch. Either I'd been hopelessly naive when I'd covered Congress as a reporter or it had changed for the worse. I was stunned to realize that if the task force had not been able to operate under the aegis of TARP, we would have been subject to endless congressional posturing, deliberating, bickering, and micromanagement, in the midst of which one or more of the troubled companies under our care would have gone bankrupt. Congress yields authority only under the direst of circumstances, as the example of TARP shows.

As Rahm had presciently urged his team at the outset, "Never let a crisis go to waste." Congress had been bludgeoned into passing TARP by Hank Paulson and the Bush administration in the midst of the near panic caused by the collapse of Lehman Brothers. At Paulson's insistence, TARP granted the White House and the Treasury unprecedented discretion over the use of $700 billion, bypassing Congress's customary role in approving individual appropriations.

Almost immediately, Congress tried to walk back the cat. The Democratic leadership appointed an oversight panel, led by Elizabeth Warren, a professor at Harvard Law School, that seemed to spend most of its time second-guessing tough calls that the administration had made (including those on autos). Meanwhile, Republicans—particularly those running for reelection—stepped up their attacks on it.

When Congress did try to intervene, as with auto dealer closures, the result was an enormous, pointless distraction for the two companies at a critical time. Its interference left me wondering what in the auto rescue Congress might like to micromanage next—choosing factory locations or deciding which executives and workers stayed and which had to go?

The fact was that like the auto rescues, the TARP as a whole had been a huge success at little or no cost to taxpayers. It saved our nation's financial system and, as a consequence, our economy. If, instead of being able to inject $250 billion into struggling banks on Columbus Day 2008, Hank Paulson had had to subject himself to congressional appropriations hearings, the result would have been an economic Chernobyl.

In January 2010, I spent a day at the North American International Auto Show, at Cobo Center in Detroit. Outside, it was cold and snowy, but inside, the mood was celebratory. "What a difference a year makes!" exclaimed Michigan Senator Debbie Stabenow, who had questioned my qualifications, before dignitaries assembled for lunch in a sterile third-floor meeting room. Congressman Steny Hoyer, who had wasted so much time browbeating the task force about a couple of Maryland car dealers, was there, basking in the excitement.

Afterward, I mischievously approached Hoyer, curious to see what kind of reception I would get.

"Nice to see you, Steve," he exclaimed in his best politician's voice. "You did a fabulous job on the autos, except for the dealers. You should have closed dealers the way that Ford did."

With that, he was gone, leaving me to wonder what he was talking about. Ford's dealer-closing program had closely resembled those of GM and Chrysler in prebankruptcy—culling a relatively small number of stores, one by one, over several years. (Months later, I was gratified to see that the principal dealer about whom Hoyer had harassed us lost the arbitration to have his four Chrysler stores reopened. The arbitrator ruled: "I found little evidence that the dealer had a well thought out and sound business plan for fitting within the Chrysler business plan, which I considered as itself well thought out and sound, having been developed by experts in the field.")

I could not imagine that this sort of congressional behavior was what the founding fathers had in mind. We know from our high school history lessons that the framers of the Constitution created a powerful presidency only reluctantly, after the loosely structured government of the Articles of Confederation proved dysfunctional. In their fear of overly strong executives (such as, say, King George III), they took care to empower the legislative branch as a strong check on the President. Looking back two centuries later, some of our founding fathers' views seem quaint. James Madison envisioned the Senate as a "firm, wise, and impartial body" that would give stability to the "General Government." And the architects of the Constitution believed that serving in Congress would be more an avocation than a vocation. Congressmen would serve a couple of terms and then go on to something else. The founders would have been shocked at a Senate whose members today have an average tenure of thirteen years and an average age of sixty-three.

One day, stewing about our partisan, posturing, gridlocked Senate, I was struck by a thought about the layout of Washington. As we all know, the Capitol is built on top of a hill, a lofty perch from which the legislature is meant to look down on the White House and surrounding executive buildings. It's a sad irony to think how low the institution has actually sunk.

TARP and autos were hardly the only examples of Congress worrying more about its prerogatives than the good of the country. The same dysfunction was evident in the battle to pass financial regulatory re-form. After the meltdown of 2008, who could doubt the need for an overhaul of our regulatory apparatus? And yet, after nearly coming up empty, what we got was disappointing.

Virtually nothing was done to bring order to the hodgepodge of regulators that oversaw banks and other financial institutions. What might have been logical seventy-five years ago, when much of the current regulatory apparatus was put in place, made little or no sense in the twenty-first century. But Congress blocked the way. For example, the Securities and Exchange Commission and the Commodities Futures Trading Commission had jurisdiction over increasingly overlapping trading activities, particularly of derivatives. The sensible thing would have been to merge the two agencies. However, the SEC was supervised by the banking committees and the CFTC by the agriculture committees. Neither set of committees was prepared to give up its authority, so the agencies remain separate.

In the short tenure of the Obama administration, I was interested to see the public's opinion of Congress catch up to my own. When I joined the administration, Congress had an approval rating of 31 percent. By July 2010, its approval rating had dropped to 11 percent, the lowest since the 1970s and well below ratings for banks and "big business." A stunning 32 percent of Americans rated the current Congress as one of the worst ever.

Either Congress needs to get its act together or we should explore alternatives. When I lived in London, I was impressed by the parliamentary system. Britain's prime minister stays in office only as long as Parliament approves his or her proposals. Since the members of the majority party of the House of Commons understand that rejecting an important piece of legislation will force a national election, they think seriously before voting against their leader. Thus, in 2010, when the new government of David Cameron proposed tough austerity measures to deal with gaping budget deficits, many were enacted almost immediately.

If our country wants government to do a better job of solving its problems, it needs to find a way to let talented government officials operate more like they would be able to in the private sector. Deese was struck by how often people in the White House or at Treasury talked about Team Auto in wistful tones, wondering how we were able to cut through the government bureaucracy, make decisions, and move forward so effectively. Had our model been used to address other problems—anything from small business to housing to allocating stimulus dollars—the outcomes would surely have been better for the nation.

I had seen this vividly demonstrated in New York City in recent years. New York has a city council, but the city's charter also provides the mayor with strong executive powers, much like what my Washington colleagues longed for. With someone like Mike Bloomberg as mayor, the result is government at its best—efficient, disciplined, and effective. Had Bloomberg fallen short, the voters could have ejected him, as they have done with subpar mayors in the past. In contrast, New York's state government, based in Albany, is saddled with a very powerful legislature that is even more dysfunctional than the U.S. Senate. In the summer of 2010, it was mired in stalemate over the state's massive fiscal crisis and about to face its fourth governor in four years.

Of course, as someone who came of age during the Nixon era, I understand why the public mood shifted toward more checks on executive power, not just by Congress but through watchdog innovations like inspectors general, such as the one who issued the silly report about dealer closings. Actions like the serious overreach by the Bush administration on national security matters present legitimate concerns. However, if we don't find a way to make our government more effective, we will be much the worse for it as a country. In February 2010, a CNN/ Opinion Research Corp. poll found that 86 percent of Americans felt that government is broken, up 8 percentage points from 2006.

My sojourn in autoland gave me an uncomfortably clear vantage from which to observe the negative consequences of globalization for U.S. manufacturing. I knew the broad outlines from the business press: our manufacturing base was being threatened by increasingly high-quality output from countries with much lower wages. China was, of course, a prime rival, but so were lots of other countries in Asia as well as in eastern Europe. Not surprisingly, the potential solutions are less clear. To oversimplify, the left believes the remedy lies in limiting free trade; the right puts its hopes in pro-business, anti-union policies.

As a product of Brown University's classical economics department, I was a signed-up, paid-up free-trader. I had studied Adam Smith as well as David Ricardo's theory of comparative advantage and enthusiastically accepted the superiority of open markets. Consumers have benefited greatly from the availability of lower-cost imported goods. Those iPhones and iPads and iPods that Americans are snapping up would cost a lot more if they were being made in America instead of in China—as would the clothes, shoes, and other basic goods that make up a typical family's budget.

And yet those invisible benefits of globalization are often overshadowed by its ugly and painful costs—high unemployment and stagnant real wages for too many Americans. Based on Census Bureau data, the wages of middle-class Americans have declined by 0.2 percent a year for the past decade, after adjustment for inflation.

The challenges of manufacturing in America hit home for me on a March afternoon early in my tenure on the auto task force. We were in a routine meeting with the parts producer Delphi. Delphi looked and smelled like a quintessential American company, with its Troy, Michigan, headquarters and its management team of mostly plainspoken midwesterners. The executives had come in that day to plead their case for a supplier rescue program.

As they went through their pitch, a question suddenly popped into my head: "How many people do you employ?" I asked.

They told me they had 146,600 workers.

"How many of them are in the U.S.?" I asked, suspecting that the number was low.

The quick answer—18,900—exceeded my pessimistic expectations. Most of Delphi's labor force, it turned out, was in Mexico, Brazil, and China.

"There's nothing we can do for you," I announced. Delphi flunked my Washington Post test: How could we use taxpayer money to help a company 87 percent of whose employees were outside the United States?

The bigger question posed by Delphi hasn't gone away. Here was a red-blooded American company with roots going back a hundred years that had, for all practical purposes, become no more American than all the manufacturers that had sprung up throughout Asia in recent decades.

While I have always been an ardent supporter of NAFTA, a casual conversation one day with Fritz Henderson after he became GM's CEO gave me pause. The company had three assembly plants in Mexico, at which it paid its workers a little over $7 per hour.

"How is the productivity in Mexico?" I asked Fritz.

"At least as good as in the U.S., maybe better," he replied. With American workers receiving $55 per hour, even after the changes to the UAW contract, it's not hard to see that downward pressure on wages could continue, notwithstanding the greater costs of importing the products. (In China GM pays workers about $4.50 per hour, and in India a bit more than $1 per hour. In both countries, as well as in Mexico, GM is considered a high-paying employer.)

Of course, history sides with free trade. Countries, states, and regions had all seen it help their economies successfully evolve. When I lived in Britain thirty years ago, coal and steel were major industries. Today they are essentially gone, and yet Britain is far more prosperous now than it was then.

This process of "creative destruction," famously articulated by Joseph Schumpeter, has also been, in fact, the engine of economic development for the older parts of the Northeast, where I've lived nearly all my life. Take Long Island City, a section of Queens just across the East River from Manhattan. Well into the twentieth century, the area was a center of American manufacturing, home to industrial businesses that made chewing gum, pianos, batteries, glass, chemicals, and many other products. There were even oil refineries and a Packard auto assembly plant.

I had a personal connection to this forgotten bit of history: my family's paint business there was one of a dozen similar ones within a short distance of each other. Today every one of those companies is gone, and yet, after a somnolent period, Long Island City is vibrant with new housing, restaurants, and service businesses, including the world headquarters of the discount airline JetBlue.

Manhattan itself has been through an equally dramatic evolution. When I was a boy, from my father's factory I could see across the river the gleaming United Nations buildings in Manhattan, built on the site of cattle yards and slaughterhouses. Those enterprises, and the jobs that went with them, moved west long ago. Farther up the East Side, a large structure housing several big-box retailers such as Target and Costco recently opened for business on the site of Washburn Wire, the last true industrial business in all of Manhattan.

Trumpeting creative destruction is easy until your own business or community gets in the way of it. The evolutionary process that worked so well for New York City has to date been a formula for extinction for Detroit and Buffalo and many other hard-hit cities. But as Diana Farrell said in the context of rescuing Chrysler, we need to be careful about how many "old jobs" we try to preserve if global competitive dynamics have overtaken them. Or as Larry Summers put it in one of his colorful metaphors, "It's like a hotel that tries to raise its occupancy by not letting people check out."

We also must be mindful that the declining employment rate in manufacturing is, perversely, due in part to success in becoming more efficient. As in farming, productivity has been growing faster in manufacturing than in service businesses, and is likely to continue to do so, meaning that, in any scenario, manufacturing will continue to shrink as a percentage of the U.S. employment pie.

We need to be hardheaded about what kinds of new jobs can be successfully nurtured. An advanced industrial economy competes best in jobs that involve high levels of skill and intellectual content, like technology and financial services. We simply cannot win with prosaic, commoditylike products that require large numbers of low-skilled workers. As tough as recent decades have been for Detroit's Big Three, the car industry is better positioned to compete than many other U.S. manufacturing businesses because labor is a relatively small part of the cost of building a car—only about 7 or 8 percent.

Our current economic problems—and the massive doses of government stimulus spending in response to them—have brought back occasional mentions of an almost forgotten phrase, industrial policy. When the American economy was floundering in the late 1970s, Japanese-style intervention in the industrial sector was all the rage. Advocates mistakenly assumed that experts and policymakers had the sagacity to spot winners and losers among businesses and to allocate government support accordingly.

We've veered dangerously close to that discredited approach again. In our well-intentioned effort to jump-start the economy, tens of billions of dollars in stimulus funds have been disbursed without anything like the rigor that private equity or venture capital investors apply. When the dust settles, we will be disappointed by how little lasting benefit we get for those dollars.

Energy technology has been a particular beneficiary of federal largess. In summer 2010, eager to claim credit for ending America's recession and to bolster his flagging standings in public opinion polls, President Obama visited projects around the country that owed their existence to dollars from D.C.

Advanced car-related facilities, like battery plants, were high on his list. But mixed in with the evidence of progress were telltale signs of waste. While there's a healthy debate about the future prospects of the industry, the Wall Street Journal quoted one expert, Menahem Anderman of Total Battery Consulting, as estimating that the capacity to produce batteries for electric cars just from stimulus-funded U.S. plants will be three times greater than global demand by 2014.

On a trip to Michigan in July 2010, the President roughly duplicated the trip Team Auto had made back in March 2009. He visited a traditional Chrysler assembly plant, and he drove GM's Volt—about ten feet. While the Secret Service dictated the short distance, it nonetheless symbolized for me the limitations of the Volt. There is no scenario under which the Volt, estimable as it may be, will make any material contribution to GM's fortunes for many years. "Green" jobs may be the fad of the moment, but in supporting them we need to forgo irrational exuberance.

When we succeed in making a manufacturing enterprise competitive again, as I believe we've done with the Detroit auto companies, we have to be vigilant about not allowing that accomplishment to be diminished. It was dispiriting to watch what happened at Ford in November 2009. The company had asked the UAW to adjust its contracts to match the improvements won by GM and Chrysler. Ron Gettelfinger and his leadership team agreed; it was only fair. But when the proposition was put to all of the Ford UAW workers, they voted it down.

A few months later, Gettelfinger's successor, Bob King, delivered his first formal address, getting a standing ovation for his call to "win back the concessions and sacrifices we made and win more than that." While I can understand why King felt a need to start from a hard-line rhetorical stance, the Detroit Three cannot possibly reinstate old wage rates or labor practices and remain competitive.

In talking with Ron Bloom as he plunged into his new assignment as the administration's "manufacturing czar," I found that, as with so many issues, Ron saw the picture clearly. Manufacturing jobs as a percentage of total jobs were inevitably going to decline; the more reasonable objective—still tough—should be to try to maintain and, ideally, to expand the absolute number of these jobs.

In Ron's mind, this means concentrating on high-productivity work, with a lot of intellectual and physical capital, meaning that labor is a relatively small part of the total cost of the item—like a car! Germany, for example, has remained a very successful exporter of manufactured goods by concentrating on high-end products like sophisticated machine tools.

Ron has searched for ways that government can help—for example, by providing tax incentives for investment. With other countries providing such incentives, particularly for the "renewable economy," Ron believes that we need to do more to be competitive. But so far, progress has been slow.

We can't blame the problems of American manufacturing entirely on the cost of labor. Management matters too. Even at a very large company, individuals can make an incalculable difference. In April 1981, not long before I arrived on Wall Street, Jack Welch became CEO of General Electric. At that time, GE and Westinghouse were archrivals. While GE's revenues of about $27 billion were substantially larger than Westinghouse's, both companies made light bulbs, appliances, turbines, and nuclear equipment and owned television stations and credit companies. The two corporations could not have been more similar if their founders had set out to accomplish that goal.

Yet, two decades later, Westinghouse was gone and GE was regularly listed among the most admired and most valuable companies. In the fourteen years before Westinghouse sold its industrial businesses, its stock rose 126 percent (mostly in the year of the divestitures) and GE's rose 931 percent. What was the difference? GE had Welch, and Westinghouse had a series of mediocre CEOs. In years of occasionally interacting with GE, I never failed to be amazed by the difference that one man made.

Disney's is a similar story. In 1984, it looked much like GM two decades later: foundering with an inadequate CEO and under attack from activist shareholders. To achieve peace, Disney brought in the Bass brothers as investors, who recruited Michael Eisner and Frank Wells to the top jobs. I had just joined Morgan Stanley, which was representing the company, and none of us would have bought Disney stock on a bet. We saw no way that it could be rejuvenated. Boy, were we wrong. Over the following ten years, Disney stock rose by nearly 30 percent per annum.

For those inclined to accept Rick Wagoner's explanation that everyone and everything was to blame for GM's problems except its CEO, consider Ford. The number two U.S. automaker faced an identical set of challenges: the same Japanese transplants, the same cost of oil, the same UAW. Indeed, by many measures Ford was in worse shape than GM in 2006, when SUV sales plunged.

But the company was lucky to have Bill Ford as chairman and CEO. As market conditions worsened and Ford's results deteriorated in 2006, he realized that he was not the man to run his company. That was extraordinary by any measure, let alone Detroit's. But Bill Ford is an unusual guy. "We're an insular company in an insular industry in an insular town," he had told an interviewer in early 2006 when the company was just beginning to show signs of financial trouble. Bill Ford's humility extended to recognizing the risks that his company faced and making the decision to pledge all its assets to borrow the $23.5 billion that arrived three months after Alan Mulally became CEO.

"I thought that I would have been absolutely the wrong person to lead a major restructuring," Ford told me as we sat at a small conference table in his Dearborn office on a warm May day. "I needed to do two things. One was to go out and find that person, and the other was to raise the money so that he would be able to restructure the place."

As a result, Ford not only weathered the crisis without bankruptcy, but as the market began to turn in early 2010, the company became solidly profitable. In fact, in the second quarter, Ford reported net income of $2.6 billion, while GM—notwithstanding its larger size and the bankruptcy scrubbing of $65 billion of liabilities—earned $1.3 billion. Clearly, GM's new CEO and his team had some catching up to do.

A key component of management failures like GM's is almost always the board of directors, historically the weakest link in American corporate governance. Ironically, GM was once considered an exemplar of board practices. In the early 1990s, after one of the company's periodic near-death experiences, the board fired the CEO, appointed a nonexecutive chairman, and developed twenty-eight structural guidelines for ensuring board independence. Business Week hailed the plan as a "Magna Carta for directors." But the board's assertiveness and vigilance soon lapsed. In 2003, it made Rick Wagoner chairman as well as CEO, a fateful step backward.

Wagoner proved more adept at manipulating the board than at running the company. In early 2006, after many quarters of disastrous earnings, board members began to grumble about Rick. Though he enjoyed the staunch support of his lead outside director, George Fisher, the dissidents took advantage of a meeting that Fisher missed and agreed to hold an executive session in which to discuss the CEO.

Wagoner got wind of this before it happened, and used an earlier, Sunday afternoon session to head it off. On that call, he issued an ultimatum. Either the board must put out a statement of support for him or he would resign immediately. Every director except Phil Laskawy, a former chairman and CEO of the accounting firm Ernst & Young, instantly fell into line. The next day, GM issued a statement by Fisher: "While there is still much work to be done, the GM board has great confidence in Rick Wagoner, his management team and the plan they are implementing to restore the company to profitability." For all the grief that President Obama has taken for how Rick came to step aside—which I sincerely regret—I have no doubt that without a new CEO, GM would be in a far worse place than it is today.

In contrast with GM's boardroom laxity, Mulally insisted when he was hired that Bill Ford remain as executive chairman. Mulally fully expects Ford and the board to judge his performance independently and to fire him if he doesn't produce results. As I left Ford headquarters after spending a couple of hours with Bill Ford and Alan Mulally, I could not help but compare my impressions from this first visit to Dearborn with my first meeting with Rick Wagoner and Ray Young. Management matters.

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We came to Team Auto as strangers and we left as friends. We were fourteen men and women who had shared an experience that would be indelibly seared in our memories. For Deese, Team Auto was reminiscent of the movie Ocean's Eleven: a team of professionals who come together to do a job, execute it seamlessly, and then just as quickly go their separate ways. While we would also go our separate ways, we would always be connected by our time together and the knowledge that we had made a significant contribution to President Obama's determined struggle to lift the economy out of recession. While I had tried to show (like the night at Rosa Mexicano) how grateful I was to my colleagues for their extraordinary effort and dedication, I decided on one final, tangible symbol of thanks. On Wall Street, when a large transaction is consummated, it is traditional to give "deal toys" to those who worked on them. With the help of a firm in New York that specialized in such commemorations, I designed a trophy: a wooden plaque with a Plexiglas windshield and brushed aluminum steering wheel mounted on it. On the steering wheel were the words "Team Auto 2009." Each person's name was etched on a small metal plaque at the bottom. And on the Plexiglas windshield, I had had the following words inscribed:

RARELY HAVE SUCH DEDICATED PROFESSIONALS HAD
THE OPPORTUNITY TO RENDER INVALUABLE SERVICE
TO THEIR COUNTRY AT A TIME OF CRISIS.

Some of our team members had come to Washington intending to put in several years of government service. In addition to overseeing the government's investment in the auto companies, Ron bravely took on the tough new assignment of trying to help American manufacturing—and Haley Stevens stayed on to help him. Diana Farrell continued as part of Larry's National Economic Council and played a key role in the passage of financial regulatory reform. Brian Deese also remained at his little desk outside Larry's office, pitching in on one economic policy challenge after another.

After considering a variety of options, Harry Wilson decided to run for the office of New York State comptroller, where he would help to salvage the state's disastrous finances. Although he ran as a Republican, I could think of no one who would be a better addition to our state's leadership than Harry. Matt Feldman elected to return to Willkie Farr & Gallagher as a senior partner, with a role in the firm's leadership.

Brian Stern went back to Wall Street and financial services investing by joining Blackrock. His capable helper, Rob Fraser, resumed his position at his private equity firm and then matriculated at Harvard Business School. David Markowitz moved to Cleveland and founded a hedge fund, and Brian Osias decided to saddle up with him. Sadiq Malik planned to join them too, but happily for me agreed first to spend six months helping with this book. My former Quadrangle colleagues Paul Nathanson and Clay Calhoon also continued the upward march of their careers. After a short stint in the Treasury general counsel's office, Paul joined the U.S. attorney's office in the eastern district of Virginia, while Clay began at Stanford Business School.

As for me, after taking time to recover from an operation to repair a detached retina, I turned my attention to this book and to working through the Quadrangle legal mess. During my thirty-five years in the working world, I had never been accused of so much as jaywalking, so it was painful for me and my family to have my honesty and integrity impugned, often by innuendo.

For example, back in April, one thoroughly irresponsible reporter, William Cohan (who had flunked out of investment banking), had written that one of my Quadrangle-related holdings presented a conflict with my auto responsibilities. He had been fed this misinformation by a disgruntled former colleague of mine, and nothing would dissuade him from publishing the allegations, including Jenni Engebretsen's unequivocal statement that I had fully complied with Treasury's rules.

I understood that having held a position of public trust, I was fair game. But just as I found journalists' treatment of my financial disclosure form disproportionate to its relevance, so too did I find the media's treatment of the investigation sensationalistic. As of August 2010, my onetime employer, the New York Times, had put my travails on the front page five times (and not once for anything related to Team Auto).

All told, I found that serving in government was a tougher and more thankless role than I imagined, even after years of having my nose pressed to the glass. Certainly the actions of anyone who serves as a government official can and should be examined. But as I've tried to convey, the pettiness and misplaced priorities of some of the scrutiny is debilitating to those who serve, whether it's the incessant barrage of self-serving or ignorant requests from Capitol Hill or the newspaper stories that inevitably accentuate the negative and minimize the positive. Not to mention, of course, the blogosphere, which has put irresponsible "journalism" through an enlarger. It's tough stuff even for battle-hardened veterans to deal with; I can't imagine how Tim and Larry have endured so many years under such a distorted lens.

Yet for someone like myself who believes in public service, an assignment like Team Auto can be a dream come true—the chance to make a meaningful difference on a huge issue that requires only minimal interaction with Congress. As for the tribulations of public life, working in the world's largest bureaucracy brings an offsetting advantage—when you call saying that you are from the U.S. Treasury, it is astonishing how quickly people respond and react! For all the sacrifices that my family and I made so that I could serve, I would do it again, and without the fear and second thoughts. Unfortunately, there aren't many assignments like Team Auto. Most jobs involve trying to inch some initiative through an executive branch review and then through Congress, which can easily become a Sisyphean task. Taking on one of those would be a much tougher decision.

Three years to the day after my chance encounter with candidate Barack Obama at the Vineyard Golf Club in 2007, I saw him there again. My extraordinary friend Mike Bloomberg was on Martha's Vineyard to play golf with the President and invited me to join him beforehand to hit some balls and catch up. When the President arrived at the driving range, he greeted me with a smile so big it seemed to make his prominent ears protrude even more.

"I was just telling Mike that I was bragging about you," he said, and described a recent meeting in which he'd gotten New York Times columnist David Brooks to admit that his March 2009 column criticizing Obama's intervention in the auto crisis had been wrong. We exchanged laughs about how Brooks, whose pieces are generally exceptional, had been far off target in this case. After a few more pleasantries, the President stepped into position on the range and began hitting. As I struggled with my shots a few yards away, I felt that a fulfilling coda had just been attached to my government service. I had helped a man whom I greatly admire achieve an important success of his young administration.

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Note on Sources

This book is primarily derived from my experiences and recollections. However, as a former journalist who always wanted to write a book but never found the subject matter or the stamina, I was intrigued by the opportunity to go beyond my memory and opinions. Among other things, I was curious to know the story of the auto crisis during the Bush period—I had no time while I was in the Obama administration to find out. I also thought this book would benefit from having the story continue through to the truly monumental event of GM's filing of its initial public offering prospectus.

The result was more than 150 interviews, mostly conducted by me but some by my able colleagues Jeffrey McCracken, Peter Petre, and Sadiq Malik. In addition to the formal interviews, there were countless—I'm sure hundreds of—shorter conversations or e-mails to try to nail down every detail. To protect the anonymity of those who wished to speak confidentially, I have chosen not to list any of my interviewees. But I was gratified that nearly every player of consequence in this drama was willing to share his or her recollections, in some cases on multiple occasions. I am deeply grateful to all who helped us; I am certain the book is better for their collective contributions.

Like other works of its genre, this account includes direct, contemporaneous quotations from participants in the many meetings and conversations. While some of these come from my memory, I have attempted to verify all quotations with as many participants as possible. (The handful of descriptions of other people's thoughts are based on later interviews with those people.) Having said that, I've now learned from direct experience that no book of this sort can honestly warrant that every quotation is precisely accurate in every detail.

Finally, Sadiq—a worker of Harry Wilson intensity and stamina—attempted to verify every single fact in these pages. If any errors remain, the fault is mine alone.

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Acknowledgments

First and foremost, I want to extend my deepest appreciation to the dedicated members of Team Auto, whose names are listed in the front of the book. They deserve the thanks of the entire nation for their selfless dedication to a seemingly impossible task. Working with such a talented and collegial group of extraordinary individuals has been the high point of my career.

Second, I am grateful to my bosses, Tim Geithner and Larry Summers, for having the confidence in me to ask me to take on this important role. Throughout our many months of work, they were available, supportive, and decisive. They are public servants of the highest order and integrity.

During my time in Washington, I was fortunate to interact with many other government employees. Contrary to what some Americans may think, the Treasury is blessed with a large array of talented and dedicated staff members, both those who came as part of the Obama administration and those who have made it their careers to serve their country. In particular, I would like to thank Mark Patterson, Lee Sachs, Matt Kabaker, Michael Tae, Duane Morse, Mara McNeill, Lindsay Simmons, Alan Krueger, Stephanie Cutter, Jenni Engebretsen LeCompte, Meg Reilly, Jake Siewert, Herb Allison, Jim Lambright, Bernie Knight, Shira Minton, Ken Feinberg, and Gene Sperling.

Throughout this tumultuous period of my life, I was fortified by the friendship and support of many. I pay particular tribute to Mayor Michael R. Bloomberg, who truly knows the meaning of loyalty and standing up for people you believe in. But there are many others to whom I am equally grateful:

Ali Wambold, Margaret Carlson, Henry Hubschman, Michi Kakutani, Richard Cohen, David Westin, Louise Grunwald, Diana Taylor, Richard Holbrooke, Kim Fennebresque, Marc Nathanson, Ron Rappaport, Barry Diller, Paul Goldberger, Vernon Jordan, Tom Lee,Jes Staley, Amos Hostetter, Michael Kramer, Orin Kramer, Leon Black, Chuck Schumer, Josh Gotbaum, David Rubenstein, Harvey Weinstein, Warren Spector, Patti Harris, Glenn Dubin, John White, Judy Miller, Richard Haass, Jerry Speyer, Alice Ruth, Tim White, Mort Zuckerman, John Hess, Susan Rattner, Steve Shepard, Jeff Greenberg, David Bonderman, Eliot Spitzer, Paula Kerger, Tina Brown, Arthur Segel, Mitch Driesman, Ken Jacobs, Bob Rubin, Mickey Drexler, Bill Clinton, Henry Kravis, Charlie Rose, Dick DeScherer, Matt Mallow, Jamie Dimon, Bob Pittman, Susan McCaw, Charles Kaiser, Brian Roberts, Meryl Tisch, Jeff Nordhaus, David Stockman, David Ignatius, Mark Gallogly, Barbara Walters, Adam Miller, Walter Shapiro, Dan Lewis, Richard Plepler, Gordon Holmes, Roger Altman, Dan Rosensweig, Jim Tisch, Chris White, Joel Klein, Dick Fuld, Bill and Pat White, Sherrie Westin, Mark White, Norm Pearlstine, Tom White, Arthur Sulzberger Jr., Steve Weisman, Lynn Povich, Craig McCaw, Mort Janklow, Blair Effron, Nicole Seligman, Fred Wilpon, Skip Gates, Walter Isaacson, Ken Auletta, Francesca Stanfill, Greg Feldman, and Andrew Ross Sorkin.

At Houghton Mifflin Harcourt, I was the fortunate beneficiary of superb editing by George Hodgman, whose enthusiasm, dedication, and gentle lash kept me going when I flagged. I also appreciate the great attention and professionalism that I received from Gary Gentel, Bruce Nichols, Andrea Schulz, Laurie Brown, Bridget Marmion, Lori Glazer, Taryn Roeder, Becky Saikia-Wilson, Larry Cooper, Michaela Sullivan, and Melissa Lotfy.

My agent, Amanda "Binky" Urban, has been a close friend for more than twenty years, and I now understand why she has been so successful in her profession.

I've enjoyed working as part of teams for the past twenty-seven years of my career, so just as we had Team Auto, we had Team Book. At the forefront was Peter Petre, a distinguished former Fortune editor and experienced book hand. Peter was my patient guide through this new land, offering expert editing, great instruction in developing the narrative, and the all-important positive reinforcement. Sadiq Malik, a devoted member of Team Auto, generously signed up for Team Book and worked countless hours helping to re-create this complex story. I am also grateful to Jeff McCracken, a crackerjack financial journalist, who took time between jobs to bring to bear his reporting, financial, and auto expertise. Last, we had a terrific supporting cast of Maris Kreizman, Catherine Talese, Julie Sloane, Cynthia Colonna, and Hajera Dehqanzada. I am amazed at how much work it takes to produce a book!

My children—Rebecca, Daniel, David, and Izzy—have suffered through a father who spent six months perpetually preoccupied and with his study door closed as he tried to wrestle this tome to the ground. I hope that from this book—as well as from watching their parents try to do good in addition to doing well—they will take to heart the importance of giving back.

Most of all, I could not have gotten through the past eighteen months without the steadfast love and support of my wife, Maureen. She is truly my best friend and partner until death us do part.

West Tisbury, Massachusetts
August 2010

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Index

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