Anti trust and Obama Inc.

Rich Lowry:

THE interlocking directorate is anathema to trustbusters and corporate watchdogs. It occurs when a board member or top executive of one company sits on the board of another company, accumulating undue power over a given industry. When it reduces competition, the arrangement is forbidden by the Clayton Antitrust Act of 1914.

If Henry De Lamar Clayton, the Alabama congressman who introduced the aforementioned act, were still with us, he'd presumably be shocked at the creation of the most far-reaching interlocking directorate in US history.

Obama, Inc. has effectively won a seat on the board of companies at the heart of the nation's industrial production and its financial system. The robber barons of old would marvel at the tentacles of influence of Barack Obama, a CEO whose power would overawe J.P. Morgan (the famous industrialist, not the bailed-out bank).

In difficult negotiations with business, Obama has the advantage of sitting at both sides of the table. This makes the art of the deal considerably simpler than when Donald Trump wrote about it years ago. Consider the matter of CAFE, the mileage standards that have been resisted by automakers for decades in a multifaceted regulatory and legal battle featuring enviros, the state of California and industrial-state lawmakers. The other day, Obama snipped the Gordian knot in an offhand swipe with his fingernail clippers.

He gathered Detroit's CEOs in the Rose Garden and announced they had acceded to a drastic increase in the standards to 39 mpg for cars in 2016. And why wouldn't they? Both General Motors and Chrysler continue to exist on the basis of Obama's good will.

After their bankruptcies, the companies will give a 72 percent and 8 percent ownership stake, respectively, to the federal government. A president needn't bother with the traditional "jawboning" of an industry, the tiresome work of a Harry Truman or Lyndon Johnson, if he carries that industry around in his back pocket.

As Chrysler headed into bankruptcy, the government got the company's creditors that were dependent on TARP funds to do its bidding and take a substantial "haircut." The banks, too, knew to heed the directive of the ultimate interlocking directorate.

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Over time, this public-private arrangement will be subject to all the traditional pitfalls of interlocking directorates, from collusion to conflicts of interest to strategic myopia. The directorates have at times been used to create cartels, commonly defined as "a form of collusion between firms in the same industry aimed at restricting output and increasing prices."

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We are already there. Obama is using his monopoly to dictate business strategy that is doomed to failure. By forcing the companies to make cars that Americans do not want in sufficient numbers for the companies to be profitable, he is creating losers. He is also using that power to harm competitors he does not own.

The bailouts are the most unpopular item on the voters' agenda. I think they will become more unpopular by November 2010. The companies likely to be the most successful are those where his power is more indirect.