shifting boundaries between the public and private sectors: implications from the economic crisis

8/9/2019 Shifting Boundaries between the Public and Private Sectors: Implications from the Economic Crisis

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SeniorJuniorExchange

Stephanie Moulton is an assistant

professor in the John Glenn School of Pub

Affairs at the Ohio State University. Her

research focuses on the publicness and

performance of nongovernmental organiza

tions engaged in public service, including

nonprofit organizations and organizations

implementing low-income housing policie

and programs.E-mail: [email protected]

Charles Wise is founding director of th

John Glenn School of Public Affairs at the

Ohio State University. He previously served

as managing editor of Public Administr

tion Reviewand received the William E.

Mosher and Frederick C. Mosher Award fo

best article in PAR three times.

E-mail: [email protected]

Shifting Boundaries between the Public and Private Sectors 34

Stephanie Moulton

Charles Wise

Ohio State University

Shifting Boundaries between the Public and Private Sectors:

Implications from the Economic Crisis

What are the differences between the public and privatesectors as well as their interrelationships in light of therecent financial crisis? Has the global economic crisis

fundamentally shifted the boundaries between the twosectors? Tis essay examines the nature and extent of theshift. Te authors present an analysis of the roubled

Asset Relief Program (ARP) to highlight the massivetransformations that are taking place and to introducelessons for future policy initiatives.

Between financial rescue missions and the economicstimulus program, government spending accounts for abigger share of the nations economy26 percentthanat any time since World War II. Te government is

financing 9 out of 10 new mortgages in the UnitedStates. If you buy a car from General Motors, you arebuying from a company that is 60 percent owned by the

government. If you take out a car loan or run up yourcredit card, the chances are good that the government is

financing both your debt and that of your bank.

Edmund Andrews and David Sanger, New Yorkimes, 2009

While understandingthe interrelatednessof the public and

private sectors has been perhapsone of the most essential andenduring challenges for publicadministration over the past

few centuries (Bozeman 1987,2007; Dahl and Lindblom [1953] 1976; Dewey[1927] 1954; Lindblom 1977; Wamsley and Zald1973), recent events in the nations economy haveelevated a fundamental questioning and reordering ofthe relationships between public and private. In thecurrent economic crisis, lines between the public andprivate sectors are rapidly being redrawn through neworganizations, policies, programs, and regulations.Questions arise about the systemic effects, intendedand unintended, that ultimately will result from theseinitiatives.

At the height of the privatization era, Wise pointedout that the fundamental question was not which wasbetter, public or private, but rather what configurationof organizations, public and private, is needed and whatarrangements between them provide the most effectiverelationships to perform the needed functions (1990,

142). oo often, policy makers have restructured publicorganizations and public service programs withoutan adequate conceptualization and understanding ofthe configuration of organizations impacting publicservices, and also without considering the modes ofinteraction that the public organizations will have withsignificant offi cials and organizations (Wise 1990,142). Now, the object has been turned aroundit isnot public services but private goods and services thatare the central focus. However, the question is quiteanalogous: what is the most effective configuration ofpublicprivate organizations to bring about particularoutcomes in the private economy while still observingthe requisites of democratic government?

As public administration scholars, it is critical that weevaluate the publicprivate configurations that are em-ployed, not only for the problem at hand, but also for

the longer-term reconfigurationof the public management sys-tem. Essentially, what are the keyconsiderations that should guidethe emerging reconfiguration of

public and private institutions?In this analysis, we consider one

particular case: the roubledAsset Relief Program (ARP). Tough initiated as aseries of targeted, short-term public investments of upto $700 billion in private institutions, ARP inter-ventions have resulted in a reconfiguration of publicand private institutions with long-term implications.Tis paper proceeds as follows. First, we briefly reviewrecent reforms targeting publicprivate configura-tions. Ten, we present the public interest, economic,and management dimensions as analytical frames by

which to evaluate publicprivate configurations. Next,we employ the dimensions to evaluate two initiatives

what are the keyconsiderations that should guidethe emerging reconfiguration ofpublic and private institutions?


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350 Public Administration Review May | June 2010

in the roubled Assets Relief Program. Finally, we conclude withimplications for research and practice moving forward.

BackgroundOver the past two decades, the privatization movement has(re)defined the relationship between public and private institutionsin many countries. Privatization refers to a variety of phenomenain the arrangement of governmentbusiness relationships, fromcontracting to load shedding (Wise 1990). Te emphasis in thismovement has been on the superiority of business operations, bring-ing businesses principles into the operations of government, and/orturning over areas of government responsibility to private businessesaltogether. Te Grace Commission report presented to Congressduring the Ronald Reagan administration and the National Per-formance Review conducted by the Bill Clinton administrationboth promised greater effi ciencies through the integration of mod-ern business methods. Te George W. Bush administration adoptedrules for putting federal jobs up for competition with private firms(OMB 2003).

Recent policies adopted since the onset of the economic crisis havebeen based on a quite different premisethat business organizations

have failed and that government organizations must be involvedin business operations to curb their excesses, to improve them, toprevent further failures and harm to the public, and to foster greatereconomic development for the nation as a whole. Other coun-tries, such as Great Britain, have adopted similar stances. Like theprivatization of public organizations, the increasing influence of thepublic sector on the private sector is not an easily identified strategy.Rather, it comprises diverse instruments or tools of government(Salamon 2002), ranging from the regulation of private sector eco-nomic activity or management practices (such as executive compen-sation), to an infusion of public funds (as with the Capital PurchaseProgram), to direct ownership or takeover of privately held firms(such as in the auto industry).

In the short term, certain government interventions may have beeneffective in preventing a more severe economic crisis. For example,if large U.S. financial institutions and automakers had been al-lowed to fail, there is no doubt that the short-term impact on theeconomy would have been substantial. Tis is not to deny that thereis significant debate about the proper role of government in privateenterprise. Tat debate is ongoing, and perhaps has been intensifiedby recent government actions. Nonetheless, rather than engage thatissue or the short-term effects of government intervention, our pointof departure is to consider the resulting reconfigurations of pub-licprivate institutions and the long-term implications for public

administration.

PublicPrivate Configurations:Dimensions for AnalysisPublicprivate configurations exist wherevergovernment authority is extended to privatefirms for the production of outcomes thatachieve public (as well as private) objectives.Tere are a variety of tools of governmentaction (ranging from regulation to contractsto direct ownership) that extend government authority to privatefirms (Salamon 2002). Indeed, one might make the case that all

organizations are public to some extent (Bozeman 1987). Telong-term success of publicprivate configurations in ensuringdemocratic governance and achieving desired objectives is contin-gent on the appropriate balance between overlapping public inter-est, economic, and management dimensions (Wise 1990). Whenthere is a shift in the configuration-such as through the additionreduction, or alteration of government authorityit is essentialto reevaluate each dimension. Here we provide key considera-tions under each dimension (with key questions summarized intable 1), followed by a discussion of the complementary role of thedimensions.

Public Interest, Economic, and Management DimensionsFirst, because of the extension of government authority, publicpri-vate configurations should be aligned with the public interest. Tekey question from the public interest dimension is, how will thepublic interest, including substantive public values and democraticaccountability, be preserved and enhanced through this publicprivate configuration? Determination of the precise meaning of thepublic interest has long been considered problematic (Dewey [19271954; Pesch 2008; Shubert 1961), but as Bozeman points out, itcontinues to carry significant meaning because legislators continueto make laws citing the public interest, regulators continue to regulate in the public interest, and courts continue to rule in the publiinterest (2002, 148). Rather than a clearly defined objective, thepublic interest is a normative ideal that includes both substantivevalues and procedural aspects (Bozeman 2007; Dewey [1927] 1954

Wise 2002). Substantive values may be derived from a nationsfounding documents, or fundamental laws (Bozeman 2002, 2007

Jrgensen and Bozeman 2002). In the United States, substantivevalues include, but are not limited to, such things as civil rights,liberty, limited government, and equal treatment (Jrgensen andBozeman 2002; Wise 2002). Procedural aspects of the public inter-est in a democracy seek to enhance democratic accountability byconsent of the governed, the responsiveness of public offi cials to thegoverned, and the appropriate use of sovereign power (Bovens 2005

Wise 1990; Wise and Freitag 2002).

Second, the economic dimension of publicprivate configurations is of critical impor-tance. Broadly speaking, the economic dimension refers to the coordination system forproducing outputs, or the task environment(Scott 2003; Wamsley and Zald 1973). Tequestion is not whether government shouldintervene in the private sector, but [w]hatcoordinated inputs between government and

the private sector are necessary to achieve the desired public (andprivate) outcomes? wo important considerations help guide the

Table 1 Core Dimensions and Key Questions

Dimension Question

Public Interest How will the public interest, including substantive public

values and democratic accountability, be preserved and

enhanced through this publicprivate configuration?

Economic What coordinated inputs between government and the

private sector are necessary to achieve the desired public

(and private) outcomes?

Management Is the government capacity and authority in place to

initiate, manage, and evaluate the configuration?

Publicprivate configurationsexist wherever government

authority is extended to privatefirms for the production of

outcomes that achieve public(as well as private) objectives.


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development of this coordinated system: (1) economic assumptions,or hypothesized relationships between means and ends; and (2) theinstitutions included directly in and implicated by the configura-tion and the effects on the broader economic system. While in sometask environments, there is a very clear relationship between inputsand outputs, in other, more complex task environments, there maybe several, sometimes conflicting hypothesized relationships betweenthe appropriate means to accomplish desired ends (Scott 2003;

Wamsley and Zald 1973). Identifying the operational assumptionsbetween means and ends thus becomes an important component ofthe economic dimension of publicprivate configurations. Further,

while specific initiatives may be targeted at a specific set of firms,all firms are part of a larger institutional environment (Scott 2003).Te success of publicprivate configurations depends in part on theset of institutions that exist in an environment at any given pointin time and on the ability to coordinate, design, and reform theinstitutions (Olsen 2006; Przeworski 1997).

Tird, whereas the economic dimension focuses on the coordinationsystem for publicprivate configurations, the (public) managementdimension refers to the coordination abilityof public administra-tion. Te key question becomes, is the government capacity and au-

thority in place to initiate, manage, and evaluate the configuration?Publicprivate configurations require uniquely equipped publicmanagement capacity that includes knowledge of and skill with theappropriate management tools (Mosher 1980; Salamon 2002), anenergetic executive equipped to carry out ongoing managementresponsibilities (Light 2008), and the authority (and credibility) toprovide direction and shape outcomes (Koppell 2001; Moe 2001;Moe and Stanton 1989).

Publicprivate configurations are more complex than ideal-type gov-ernment institutions that are responsive only to hierarchical politicalcontrols or ideal-type market-driven firms that are responsive to cus-tomers and, ultimately, to shareholders (Moe 2001; Mosher 1980;Salamon 2002). Te combined authority relations in publicprivateconfigurations make strategic behavior on the part of the participat-ing institutions inevitable (Agarwal et al. 2009; Leone 1981; 1986;Oliver 2008; Shaffer 1995). Government institutions charged withcoordinating such configurations must have the prerequisite capac-ity and authority to anticipate strategic behavior and make adjust-ments as needed in line with the public interest.

Complementary Role of the Dimensions

Te public interest, economic, and management dimensions are notmutually exclusive; rather, there is substantial overlap between thedimensions that is critical to the success of the configurations (Wise

1990). Under the political economy perspective, market mecha-nisms are viewed as a means to achieve publicly desired endsnotas ends in and of themselves (Dahl and Lindblom [1953] 1976;Lindblom 1977; Wamsley and Zald 1973). In their discussion ofthe political economy of public administration, Wamsley and Zald(1973) point out that there are multiple economies that can beselected to transform inputs into outputs; one can think of severaldifferent mechanisms that could be employed, for example, toproduce military equipment or to provide food to hungry children.Te selection of the economy (or the means to produce desiredends) is as much a political decision as an economic decision. In thisregard, the public interest dimension complements the economic

dimension to ensure that the meansends system selected is work-ing toward publicly desired ends through publicly acceptable (andaccountable) means. Further, without the capacity and authority inplace to initiate, manage, and evaluate the configuration, even anappropriately selected economy in line with the public interest willnot be sustained and will fail to meet its objectives.

Case Study: Troubled Asset Relief ProgramTe recent economic crisis in the United States has resulted in amyriad of public initiatives and programs to prevent systemic failurof the entire economy. Many of the public initiatives have beentargeted at the private sector, resulting in new or revised publicpri-vate configurations that have transformed our understanding ofpublicprivate relations. While there are a plethora of case studiesto consider, perhaps one of the best known public initiatives thatencompasses many of the complexities of the new configurations isthe roubled Asset Relief Program. ARP was initiated in October2008 under the Emergency Economic Stabilization Act (EESA) topurchase, sell, and manage toxic assets; however, ARP quickly

was refocused to include a much broader purview. A quarterlyreport from the Special Inspector General for ARP in April 2009comments on the magnitude of its coverage: From programs

involving large capital infusions into hundreds of banks and otherfinancial institutions, to a mortgage modification program designedto modify millions of mortgages, to public/private partnershipspurchasing toxic assets from banks using tremendous leverage pro-vided by Government loans or guarantees, ARP has evolved into aprogram of unprecedented scope, scale, and complexity (SIGARP2009b).

able 2 provides a summary of the $474.70 billion in ARP fundsspent on various programs as of November 30, 2009, reported bythe Congressional Oversight Panel (COP 2009a). Here, we willfocus on two of the largest programs under ARP, which togetherrepresent 59 percent of the total funds allocated to date(see figure 1). Te largest portion of funds (43 percent) was spenton the Capital Purchase Program (CPP), which invests in qualifiedfinancial institutions, such as banks and bank holding companies,that are viewed as important to stabilizing and growing the U.S.

Table 2. TARP Disbursements and Commitments as of November 30, 2009

(Billions of Dollars)

Program Disbursed Committed

Capital Purchase Program $204.7 218.0

Targeted Investment Program 40.0 40.0

Capital Assistance Program TBD TBD

Systematically Significant Failing Institutions 69.8 69.8Term Asset-Backed Securities Lending Facility 20.0 20.0

Asset Guarantee Program 5.0 5.0

Automotive Industry Financing Program 77.6 77.6

Supplier Support Program 3.5 3.5

Making Home Affordable Program 27.4 50.0

Consumer and Business Lending Initiative 0.0 15.0

Public Private Investment Program 26.7 30.0

Total committed $474.70 $528.90

Total uncommitted N/A 169.80

TOTAL $474.70 $698.70

Source: Congressional Oversight Panel (2009a).


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economy. Four qualified financial institutions have received nearlyone-half of the allocations under the CPP to dateBank of Amer-ica, JPMorgan Chase, Wells Fargo, and Citigroupalthough morethan 600 institutions have received some amount of funding underthe CPP (SIGARP 2009c). Previously, firms had to wait three years

to repay the CPP funds, but revisions to the legislation now permitrepayment if the firm can demonstrate its financial sustainability.1Te second-largest investment of ARP funds, representing 16 per-cent of the total invested to date, has occurred through the Automo-tive Industry Financing Program, namely, to General Motors andChrysler. Te purpose of the investment is to prevent a shock to theU.S. financial markets and the economy more broadly that wouldresult from the failure of these large private firms. Te other notableexpenditures are investments in specific firms, including investmentsin AIG under the Systematically Significant Failing Institutions Pro-gram (15 percent of the total) and investments in Citigroup underthe argeted Investment Program (8 percent of the total).

Te complexity underlying the publicprivate configurations implicated in theCapital Purchase Program and Auto IndustryFinancing Program is formidable. Unpack-ing this complexity provides importantconsiderations not only for the success ofthese particular initiatives, but also for futurepublicprivate configurations moving for-

ward. Trough a review of these two cases, wehighlight some of the issues that are pertinent to the public inter-est, economic, and management dimensions. Tis information isthen used to derive implications for future research and practice of

publicprivate configurations.

Capital Purchase Program

Te primary vehicle under ARP for the stabilization of financialmarkets is the Capital Purchase Program. Te purpose of the CPP isto provide additional capital to healthy financial institutions by pur-chasing preferred shares of the financial institutions in exchange fordividends and warrants. By increasing the capital base of the healthyinstitutions, the institutions should have increased capacity to lendto businesses and consumers, thereby stimulating the economy. TeCPP could invest up to $250 billion in viable financial institutions(recommended by their federal regulator), which would benefit

from additional capital for lending activity or stability. As of No-vember 2009, preferred shares and subordinated debentures of 692financial institutions were purchased for $205 billion, 50 financialinstitutions had redeemed their preferred stock, and 30 had also re-purchased their warrants (U.S. Department of the reasury 2009e).

Te CPP constituted only one component of the federal govern-ments stabilization efforts, which also included programs run bythe Federal Reserve and the Federal Deposit Insurance Corporation(FDIC). As of December 2009, the Federal Reserve had a maxi-mum possible exposure of $1.73 trillion, which exposed the FederaReserve to potential losses of up to $220.4 billion; the FDIC maxi-mum possible exposure was $666.7 billion. Altogether, the estimateof the federal governments maximum possible exposure was $3.1trillion, including uncommitted ARP funds (COP 2009a, 77).

Public Interest Dimension

Te public interest dimension is concerned with preserving andenhancing both procedural accountability and substantive publicvalues. Procedurally, from the inception of the CPP, there have beenquestions about the selection of healthy firms to receive capitalinfusions (and the disclosure of selection criteria and processes). A

committee within the reasury Department reviewed literally thou-sands of applications from banks, savings and loans, insurers, andothers (deemed eligible by their federal regulator) to select finan-cial institutions for funding. reasury offi cials did not disclose thecriteria used in deciding which institutions were suffi ciently healthyto warrant assistance and which were not, stressing that the processhad to be confidential so that rejected banks did not suffer damagein the markets, further harming the financial system (Landler 2008

With regard to implementation, Congress imbued multiple organi-zations with accountability mandates under ARP: the Special In-spector General of the roubled Assets Relief Program (SIGARP),the Government Accountability Offi ce (GAO), the Congressional

Oversight Panel (COP), and the FinancialStability Oversight Board (FINSOB). Techallenge in getting the accountability bal-ance right in the Capital Purchase Programlies in the trade-offs between investing theaccountability agents (SIGARP, GAO, COPFINSOB) with suffi cient powers to obtain(adequate) information but not overly intru-sive powers that give financial institutions a

disincentive to participate, thereby decreasing the chances of restor-ing financial stability. Tis trade-off is exemplified by the informa-tion that must be disclosed by the recipients of ARP funds. While

the reasury Department has issued several reports and includessome data on its Web site, SIGARP and COP have continuallyrecommended that the reasury Department collect additionaldata from ARP recipients on the actual use of funds, a step that isnecessary to meet the reasurys stated goal of bringing transparencyto the ARP program and informing the American people and theirepresentatives in Congress about what is being done with theirmoney (SIGARP 2009c, 8). Te reasury Department rejectedthe recommendation, and claimed that the exact use of federal aidcannot be tracked because money in a bank is like water pouredinto an ocean (Appelbaum 2009). Te GAO also has continuallyfound that the reasury has not developed a means of regularly

Figure 1 TARP Expenditures to Date

Te complexity underlying thepublic private configurations

implicated in the CapitalPurchase Program [(CAP)]

and Auto Industry FinancingProgram is formidable.


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and routinely communicating its activities to relevant congressionalcommittees, members of the public, and other critical stakeholders(GAO 2009d), speaking directly to the procedural public interestfunction of democratic control.

In addition to procedural accountability to the public interest,substantive public interest concerns have been raised regarding theexecutive compensation policies of CPP (and other ARP) recipi-ents. Ignited by outrage over the $165 million in AIG retention bo-nuses (Cooper 2009), focus on executive compensation has been acentral component of ARP. According to Section 111 of the EESA,ARP Recipients [may] not have pay packages that promote exces-sive risk (P.L. 110-343 Division A, codified as 12 U.S.C. 5221).Since 2008, most all iterations of ARP have included provisionsrelated to executive compensation. Te Interim Final Rule on ARPStandards for Compensation and Corporate Governance, issued bythe reasury Department on June 10, 2009, stipulated an annualcompensation limit of $500,000, in addition to limits on bonusand incentive compensation, until ARP funds are repaid. Further,a special master (Kenneth Feinberg) was appointed by reasury Sec-retary imothy Geithner to formally review compensation packagesat ARP-assisted firms (U.S. Department of the reasury 2009b),

thereby increasing perceived public accountability.

For CPP recipients, issues of executive compensation limits areparticularly troubling. Many of the rationales for reform are tiedto the assumption that executive compensation practices are linkedto the performance of a firm (Bebchuck and Fried 2003; Bebchukand Spamann 2010), and to allegations that previous compensa-tion policies within financial institutions led to the type of excessiverisk taking that lies at the very heart of the financial crisis (CNBC2009). However, because executive compensation restrictions arelimited to those firms receiving ARP subsidies, and because therestrictions are lifted when ARP funds are repaid under the CPP,the long-term public interest in reforming executive compensationmay not be substantively addressed (Bhagat and Romano 2009).

In summary, both procedural and substantive public interests under-lying the CPP have been a motivating force, but have yet to be fullyrealized. In the first days, the reasury Department shifted from itsstated intent to purchase toxic assets to direct investment. It didnot disclose its decision criteria for selected institutions to receive as-sistance, and it has been criticized by the oversight agencies for failingto track the uses of ARP funds. Further, while there are substantivepublic interests driving executive compensation reforms for assistedfirms, the adopted reforms, which apply only to assisted firms par-ticipating in the CPP, are more likely to result in strategic behavior

on the part of firms (to pay off the ARP funds before they are trulyhealthy) than in the substantive achievement of the public interest.reasury offi cials have asserted that the nature and demands of thefinancial markets and the need to adapt to such markets have deter-mined their actions. Such conflicts illustrate the diffi culty of strikingthe right balance between the requisites of democratic control, publicvalues, and executive evaluation of market conditions and dynamics.

Economic Dimension

Te economic dimension is concerned with the coordinated inputsbetween government and the private sector necessary to achievedesired public outcomes. Since passage of the Full Employment Act

of 1946 (15 U.S.C. sec. 1021), the federal government has assumedthe responsibility for economic stability of the country.2 A primaryrationale for the Capital Purchase Program was to head off the sys-temic failure of the credit markets and the collapse of the financialsystem, which was projected to lead to a serious price deflation andresultant depression in the economy. Te president, the Secretaryof the reasury, and the head of the Federal Reserve all claimed thatcapital support to private financial institutions was needed to pre-vent these results and to restore growth in the capital markets.

Under the CPP, the governments intent is to restore financial activ-ity in the market by directly investing money (in the form of capi-tal) in financial institutions. Te program is designed to generatea positive return to the taxpayer while strengthening the backboneof and providing confidence in our nations financial system (U.S.Department of the reasury 2009f). Before exiting the program andrepaying government, financial institutions have to demonstratethat they are well capitalized through nongovernmental sources.Te success of the CPP is dependent on at least three economicassumptions: that selecting financial institutions for capital infusion

will indeed increase lending activity and signal legitimacy/stabilityto private market participants, that the taxpayer funds will be paid

back with a return on the investment, and that financial institutionwill remain in the program until they are healthy enough to gener-ate and sustain private capital and lending activity. If any of thesethree assumptions is miscalculated, the CPP may be ineffective.

Te success of the CPP is also influenced by dynamic factors outsideof direct government control. For example, the market may respondin unexpected ways to the capital infusions by government into financial institutions. While government intervention has the potentialto stabilize the system by shoring up bank capital, it can also riskfurther scaring away private capital by creating new forms of riskand uncertainty (COP 2009c, 7). Tis risk is largely attributable tothe propensity of government to pay below-market prices for assets.Indeed, although the government is being repaid and earning a de-cent return on its investment (estimates at the end of August total $4billion repaid at an equivalent of 15 percent annually), some financiaexperts say that the reasury paid too much for the assets, and couldhave earned three times the amount of return (COP 2009b, 2).

Numerous other institutionsindependent of the CPPalsodrive the success (or failure) of the market. As the GAO has noted,isolating and estimating the effect of the CPP (and other ARPprograms) includes discerning the influence of other large capitalinfusion programs initiated separately by the Federal Reserve, andthe dynamics of world markets and money flows. In June 2009, the

GAO noted that indicators of risk in credit markets had improvedsince March, although the cost of credit had risen in some markets(GAO 2009b, 68; 2009c). However, determining the role that theCPP played in this, as one of several interdependent institutionalinfluences, is extremely diffi cult.

Te COP concluded that while ARPs effects are impossible to isolate, the consensus is that ARP was an important part of a broadergovernment strategy that stabilized the U.S. financial system by re-newing the flow of credit and averting a more acute crisis. Howeverthe COP also stated, It is apparent that after fourteen months theARPs programs have not been able to solve many of the ongoing


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problems Congress identified. Credit availability, the lifeblood ofthe economy, remains low. In light of the weak economy, banksremain reluctant to lend, while small businesses and consumers arereluctant to borrow. In addition, questions remain about the capital-ization of many banks, and whether they are focusing on repairingtheir balance sheets at the expense of lending (COP 2009a, 112).Te panel also found that bank failures continue at a nearly unprec-edented rate, toxic assets remain on the balance sheets of many largebanks, and the foreclosure crisis continues to grow (COP 2009a, 5).

With regard to the goal of recouping taxpayer money, by the end of2009, financial institutions that had received CPP funds had paidback $164 billion. Financial institutions still owing the governmentmoney included Citigroup, to which the government had provided$45 billion, of which $25 billion was provided in exchange forcommon stock, making the federal government the largest singleshareholder with 36 percent of shares. oward the end of 2009,ARP realized its first direct losses of $2.63 billion as a result offailures of three financial institutions. In addition, 38 banks havemissed dividend payments, and six others have deferred dividends(COP 2009a, 31). Te COP observed, In addition to costing tax-payers, the recent bank failures call into question reasurys assertion

that CPP funds were only available to healthy or viable banks(2009a, 31). Te Special Inspector General provided additional cor-roboration through his audit, which found that reasury and otherregulators descriptions of the financial conditions of the first nineinstitutions as healthy were inconsistent with the private beliefsof decision makers at reasury and the Federal Reserve, and laterproved to be inaccurate (SIGARP 2009d, 8).3

In summary, the Capital Purchase Program may have contributed toaverting an acute financial crisis, but the jury is still out on whetherit can suffi ciently increase lending activity, how much return oninvestment taxpayers will receive, and whether financial institu-tions were kept in the program for a suffi cient amount of time togenerate and sustain healthy lending activity.

While several banks have paid back their CPPfunds, the largest bank, Citibank, has not. Atthis time, it remains uncertain whether thosebanks exiting the program are really healthyenough to withstand further economic tur-moil or to increase their lending to businessesand home owners (or whether their exit issimply strategic to reduce public interference,as with executive compensation practices). Tefederal governments leverage, while substan-tial, is not controlling and must be assessed

within a system in which trillions of dollarsare circulating according to the actions of amyriad of institutionshedge funds, sover-eign wealth funds, and government lenders.

Management Dimension

A noteworthy issue in any new governmentinitiative, including the CPP, is whether thefocal government agency has the manage-ment capacity to achieve the desired impact.Te primary management issues with theCPP relate to the speed with which the

implementation and oversight bodies were instituted, and theacquisition of suffi cient expertise to manage a complex and shiftinginvestment program. Te first decision for policy makers is whetherto assign the new responsibility to an existing organization or to create a new organization; generally, policy makers favor the creation oa new, less rigid organization (Johnson 1990; Wise 2002).4 In thecase of the CPP, the Emergency Economic Stabilization Act of 2008mandated that an Offi ce of Financial Stability (OFS) be established

within the reasury Department to administer the funds appropri-ated under the act, a hybrid between the old and new.

In effect, the reasury Department was required to create a neworganization that immediately had to distribute hundreds of billionof dollars, somewhat like building an airplane while flying it. Tefinancial stability effort was put into place by appointing an interimassistant secretary for financial stability and other interim offi cials.Coming in the last days of an outgoing presidential administration,the appointment of permanent offi cials who would bear continu-ing responsibility for the program was not realistic. Te slownessof the political appointments and confirmation processes furtherconstrained the capacity of the reasury Department to providepolitical and policy leadership for the program at the departmental

level.5

As a result, the major policy decisions involved in the CPP,as well as the numerous other programs, were made by the reasurySecretary and a group of unoffi cial senior advisors who had not beenappointed by the president or confirmed by the Senate (Andrewsand Labaton 2009). Sheila Baird, chair of the FDIC, observed,Tere are a couple of go to people trying to do five different jobs. Ido think thats a real issue . . . I think being unable to get their ownpeople has hampered their ability (Cho 2009).

Te reasury Department also faced a number of challenges in hiringprofessionals with suffi cient expertise to staff the OFS and oversee thCPP (GAO 2009b, 2009c).6 Because of the skills needed to managea complex investment program such as the CPP, candidates who had

the right skills often worked for a financialregulator that could offer a more competitivesalary than the OFS (GAO 2009b, 2009c).Conflict of interest considerations increasedthe time needed to recruit and hire personnelfor the OFS and, in some cases, caused quali-fied individuals to withdraw from consider-ation. o supplement the efforts of the profes-sional staff, the reasury Department turned tcontractors, and by June 1, 2009, it had com-pleted 40 ARP financial agency agreements,contracts, and blanket purchase agreements

(GAO 2009b, 2009c). Of course, employingprivate sector contractors to be involved withactivities that fund and regulate other privatesector organizations poses potential conflicts ointerest, a matter of significant concern to theoversight agencies (GAO 2009b, 2009c).

In summary, an assessment of the apparatuswithin the federal government to manage aprogram as large and unprecedented as theCPP reveals significant management capacityissues, including the extremely short time to

A noteworthy issue in any newgovernment initiative, including

the CPP, is whether the focalgovernment agency has the

management capacity to achievethe desired impact. . . . In the

case of the CPP, the EmergencyEconomic Stabilization Actof 2008 mandated that . . .

[a new agency] be establishedwithin the reasury Department

to administer the funds. . . . Ineffect, the reasury Departmentwas required to create a neworganization that immediatelyhad to distribute hundreds ofbillions of dollars, somewhat

like building an airplane whileflying it.


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establish a new organization and to secure suffi cient personnel withthe requisite expertise to manage the program. Te program hasbeen largely managed on an ad hoc basis, with insuffi cient staff andmany staff assigned on a temporary basis. Te establishment of man-agement systems and authority relationships is an ongoing process.

Automotive Industry Financing Program

Beginning in late 2008, the U.S. reasury launched the AutomotiveIndustry Financing Program (AIFP) to prevent a catastrophic failureof two of the largest U.S. automakers.7 Such a failure was expectedto cause systemic risk to market stability and the economy at large(U.S. Department of the reasury 2009a). Specifically, the reasuryDepartment provided $79 billion in loans and equity investments toGeneral Motors (and its lending arm, GMAC) and Chrysler (and itslending arm, Chrysler Financial) by November 30, 2009, resulting ingovernment ownership of 61 percent of General Motors and 10 per-cent of Chrysler (COP 2009a, 71). As a result of their participationin the AIFP, both companies have taken on a government-advisedrestructuring program and adhere to rigorous standards to protecttaxpayer interests (U.S. Department of the reasury 2009a). GMAC,to which the reasury Department originally committed $12.5 bil-lion in AIFP funds, received an additional $3.8 billion at the end of

December 2009, making the federal government the majority stock-holder with 56 percent of shares. As a result of the increase in owner-ship, the reasury Department will appoint four of the nine membersof GMACs board (U.S. Department of the reasury 2009c).

Public Interest Dimension

Te public interest dimension, including both substantive and pro-cedural components, is critical in the AIFP. First, based on author-izing statutes, there is some question as to whether the expenditureof ARP funds through the AIFP is legitimate. Te EESA does notexplicitly state that ARP is available to provide assistance to theautomotive industry or to any specific industry except the financialand banking industry.8 When asked before the House FinancialServices Committee about auto companies and ARP, reasurySecretary Henry Paulson testified, I dont see [preventing the failureof one or more auto companies] as the purpose of ARP. Congresspassed legislation that dealt with the financial systems stability(2008, 1819). In fact, the House of Representatives passed aspecific bill to appropriate $14 billion for the auto companies, butthe bill was defeated in the Senate. At that point, the administrationreversed its position and claimed that EESAs definition of financialinstitution was broad enough to include automotive companies,

whose failures would pose a systemic risk to financial market stabil-ity and have a negative effect on the economy of the United States(U.S. Department of the reasury 2009d).

Both constitutional and statutory issues potentially arise fromthe use of ARP funds under the AIFP. Te COP concluded that[w]hile reasury (and President Bush) have made various state-ments regarding their interpretations of the statute and the au-thority to use ARP in this way, it is not clear that any of thesestatements is suffi cient to qualify as speaking with the force of law,especially since there has not been one coherent statement but a mixof court filings, oral argument, and statements by reasury offi cials(COP 2009d, 77). Te panel recommended that reasury providea legal opinion justifying the use of ARP funds for the automotivebailouts (COP 2009d, 115).

Another substantive public interest issue lies in the public objectiveof the government in investing in these two companies. Te COPfound that the reasury Departments public statements cited different objectives at various times and had not clarified them, makingit diffi cult to evaluate the success of the AIFP (COP 2009d).9 Tepanel recommended that the reasury Department clarify its policyobjectives, reasonable expectations, and the implications of thesepolicy decisions in the automotive bailouts, and that if the objec-tives included more than the rescue of the two companies but alsoother aims such as environmental improvement, support for pen-sion obligations, or continued employment, the department shouldmake that clear and provide transparency on the costs of such objectives (COP 2009d, 112).

Procedurally, potential for conflicts of interest exists by virtue ofthe governments dual ownership and regulator roles in the twocompanies. Can the government safeguard the public interests asa regulator, and ensure the viability of the firm as an owner? TeCOP pointed out that most courts have found that the controllingshareholder has a fiduciary duty to the corporation, but that thepursuit of public policy objectives using an investee corporationcould violate these duties. Even under the best of intentions, the

potential for conflict exists, and the longer the government playsthe role of both regulator and regulated, the greater the opportunityfor a conflict to occur (COP 2009d). Te panel pointed out thata further complicating factor is the risk of political interference ingovernment-owned entities. Te risk was realized when Congresspassed legislation to give arbitration rights more than 2,000 autodealers whose franchises had been withdrawn by General Motorsand Chrysler in moves to cut costs and reorganize their sales. Telegislation allows dealers to have their cases considered by an arbitrator, who can make a binding decision to reinstate the franchise.Te interest of the dealers seeking to have their franchises restoredlikely conflicts with the viability interests of the auto companies andthe government, and could also conflict with other private interests(competitors) that in many cases benefit from rejected franchises(Wilson and Roland 2009).

Tus, in summary, the Auto Industry Financing Program revealssignificant issues related to the public interest dimension, beginning

with the decision to use ARP funds to purchase stakes in and lendto automobile companies in the first place. Te legality of this re-mains in question. Te issue of what public objectives are being pur-sued in the implementation of the program also remains. Te issueof what special interests will be able to influence decisions affectingthe companies remains. Procedurally, conflicts of accountability arisebetween the dual role of government as both owner and regulator.

Economic Dimension

Te publicprivate configurations in the AIFP have critical eco-nomic dimensions that will largely determine the success (or failureof the entire intervention. In December 2008, the reasury De-partment issued bridge loans to General Motors and Chryslertotaling $22.9 billion, with the caveat that the auto companies

would present restructuring plans to the reasury in February.After reviewing the plans, the reasury Department deemed thatthe companies needed to undergo serious restructuring (eventuallyinitiated through bankruptcy) before they could be on a financiallyviable path and thereby receive additional federal dollars (GAO


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2009d). A series of economic assumptions underlie the probabilityof the AIFPs success: that the challenges for achieving financialviability can be appropriately identified, that these challenges canbe overcome through restructuring and federal investment, and thatthe actions taken by the government to help restructure GeneralMotors and Chryslerif successfulwill have a positive net effecton the auto industry and the economy.

In an April 2009 report on the AIFP prior to the restructuring, theGAO noted several challenges facing General Motors and Chryslerthat, though perhaps beyond their control, will impede the effort toachieve financial viability. Tese include weak economic conditions,frozen credit markets, the solvency of suppliers, the costs of devel-oping advanced technology vehicles, reductions in the number ofdealerships to align with sales volumes, uncertainty over future fueleconomy standards, and debt reduction (GAO 2009d). Any one ofthese factors might be considered a formidable challenge. Develop-ing the appropriate restructuring package to meet these challenges(and others not anticipated) through planned interventions ratherthan market processes is daunting.

Further, assuming that General Motors and Chrysler emerge

which is questionablewhat is the intended objective withregard to the larger economy? Te ultimate public end pur-sued by the configuration should not be firm specific, but rathershould benefit the economy at large. Te market share trend linefor domestic automakers is steadily decreasing (GAO 2009a).10By buying shares in only General Motors and Chrysler, it wouldappear that the government is trying to turn the domestic auto-maker sales trend line upwardessentially reshaping the market.Tus, a successful General Motors and Chrysler emerging fromthis crisis would indicate a reallocation of market share from autocompanies not receiving federal intervention toward the reconfig-ured General Motors and Chrysler. Several questions are raised bythis attempt. Is it within the capacity of government to reshapesuch a large market by making selective investments? What arethe criteria for making such investments, other than firms that areon the verge of failing? Should other domestic producers (such asFord) receive compensation if they lose market share as a resultof government action? Tis broader industry perspective must betaken into account when configuring and evaluating the politicalauthority interventions.

In summary, the economic viability of the two auto firms receivingdirect government support is still uncertain. Teir survival will de-pend on numerous factors, many of which are not subject to leverageby the federal government. Beyond viability is the issue of what the

federal government is attempting to achieve in the U.S. automobilemarket as a whole. Can and should the federal government realignmarket share in the transportation sector? Teimpacts of the attempt will be revealed regard-less of whether the companies survive.

Management Dimension

Te management dimension is concernedwith the capacity and authority not only toinitiate a publicprivate configuration, butalso to manage and evaluate that configura-tion toward the desired outcomes. In order

to manage the federal governments investment in General Motorsand Chrysler, the president created an interagency structure, thePresidential ask Force on the Auto Industry, co-chaired by thesecretary of the treasury and the director of the National EconomicCouncil and including four other cabinet secretaries, as well as thedirectors of the Offi ce of Management and Budget, the Environ-mental Protection Agency, and the White House Offi ce of Energyand Climate Change and 10 other staff of various White Houseand departmental entities. In addition, he named two advisors (RonBloom, a former investment banker and advisor to the presidentof the United Steelworkers, and Steven Ratner, the cofounder of aprivate equity firm) to lead the now-defunct reasury Departmentauto team, which had responsibility for evaluating the companiesviability plans and negotiating terms of assistance.11

Before disbanding, the auto team noted dual roles for the govern-ments management strategy in the AIFP: (1) to avoid interveningin day-to-day corporate management and refrain from becominginvolved in specific business decisions, as its role was not to managebut to serve as a potential investor of taxpayer resources with thegoal of promoting strong and viable companies (Bloom 2009a);and (2) to behave in a commercial manner (Bloom 2009b). Te

auto team made conflicting statements about how the reasuryDepartment would fulfill the first rolenot intervening in day-to-day management. On the one hand, the reasury Departmentstated that it would manage its shares in a hands-off manner,voting only on core governance issues, including the selection ofdirectors and other major corporate actions and transactions (Bloom2009a, 9). On the other hand, the team stated that in order to cre-ate conditions most likely to lead to sustained viability for GeneralMotors and Chrysler, it was necessary to change the culture withinthe companies (Maynard 2009). Te COP questioned this moreinvolved management strategy: Te lingering issue is whether thegovernment can really change the culture of these companies andhelp improve their profitability while it remains a (supposedly)disinterested shareholder with a hands-off approach to manag-ing its investment (COP 2009d, 83). Te panel opined that if thegovernment intends to be a silent partner, then it remains to be seenhow it intends to protect the interests of the taxpayers as sharehold-ers (COP 2009d, 83).

In examining the reasurys intent to behave in a commercialmanner, the COP found that the departments performance inprotecting the interests of taxpayers in the support of auto compa-nies is somewhat mixed. On one hand, the department negotiatedaggressively in the transactions, demanded significant concessionsfrom the other stakeholders, and protected taxpayers as if it were a

private sector investor. On the other hand, the COP found that thedecision to enter into the transactions in the first place suffered from

a lack of transparency (COP 2009d, 111).Te panel also observed that the longer thereasury Department lingers on the decisionsof management, the greater the opportunitythat such decisions could become politicized(COP 2009d).

In addition to concerns about day-to-daymanagement, there are substantial challenges

with evaluating the success of the AIFP. As

Te management dimension isconcerned with the capacity andauthority to not only initiate apublicprivate configuration,

but also to manage and evaluatethat configuration toward the

desired outcomes.


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noted in the public interest dimension, the primary objectives andthe strategy for pursuing them are not clearly stated under the AIFP,making it diffi cult to evaluate success (COP 2009d). Te mostclearly communicated objective was perhaps expressed by the leaderof the now-defunct auto team, who stated that the primary metricfor success of ARP investments (in General Motors and Chrysler)is whether taxpayers see a return of their money (Bloom 2009a).However, the COP found that there are significant obstacles to thetwo companies ever achieving the level of profitability that wouldpermit the return of all the taxpayer funds expended, and reasurysbest estimates are that some significant portion of those funds willnever be recovered (2009d, 110). Tus, while measurable, a returnof taxpayer money clearly was not the primary objective for the

AIFP initially.

Te loan agreements that the reasury Department executed withthe companies stated that the funding should be used to enable theautomakers to develop a viable and competitive business and todevelop the capacity to produce energy-effi cient advanced technol-ogy vehicles, among other things. However, the GAO found thatthe goals stated in the loan agreements included concepts that

were not defined, such as rationalized manufacturing capacity and

competitive product mix. Te GAO also found that in addition tolacking clear definitions, some of the reasurys goals may work atcross-purposes and require an assessment of the relevant trade-offsamong the goals. Mirroring the findings of the COP, the GAOconcluded that it will be important for the reasury Departmentto clearly articulate what it intends to achieve with this assistance(GAO 2009a).

In summary, major management challenges, particularly related tothe objectives of the strategies and the metrics for assessing prog-ress, still remain before the implementing agency. As discussed, thegoals of the program have not been clarified and potentially conflict

with one another. Te strategy for pursuing the governmentsgoalsboth remaining hands off and behaving in a commercialmannerare likewise potentially conflicting. Politicization hasalready occurred as Congress has legislated over dealer closures, andthat decision sets the precedent for further potential politicization ofmanagement decisions.

Conclusions: Implications for Practice and ResearchIt has become commonplace to refer to the blurring of the publicand private sectors. Indeed, private actors frequently are relied on toprovide public services, and, as demonstrated by the recent econom-ic crisis, public actors are relied on to ensure functioning privatemarkets. Te idea of a strict dichotomy between sectors is more of

a straw man than a reality. However, rather than blurring intoa homogenous, autonomous entity, these publicprivate configura-tions have critical dimensions that require continuous monitoringand shaping.

First, these configurations, endowed with varying degrees of politicalauthority through formal institutions of government, have a respon-sibility to act in the public interest, both substantively serving publicvalues and procedurally being democratically accountable to the public.In the case of ARP, the challenges in fulfilling this public interestresponsibility are significant. Many of the initiatives under ARPhave been broadly defined, with even broader executive discretion

to implement the initiatives. ypically, the notion of popularcontrol implies that programs are executed by agencies based onauthority granted by Congress. However, in large part, the reasuryDepartment has been responsible for not only defining but alsoredefining its own authority to intervene on behalf of the publicinterest.

Tis is further complicated by a lack of transparency, reducing theaccountability of both the public agencies and the private partici-pants. And, perhaps more perplexing, even if there is some degreeof accountability (through reporting on observable indicators),the bigger question is, accountable to whom and for what? Whoseinterestsshareholders, taxpayers, businessesis the governmentresponsible to protect, when all are so tightly interrelated? Whatdefines a successful outcome in the public interest, when there arecompeting publics and competing interests?

Second, publicprivate configurations are based on a set of economicassumptions about how government action will affect market dynamicsTese assumptions must be made explicit and open to continuous reviewand evaluation to ensure that the intended consequences are maximizedand the unintended consequences are minimized. With regard to

ARP, the two cases demonstrate substantial variation in theexplicability and accessibility of the underlying assumptions. Forthe CPP, there is an underlying logic linking capital infusions withincreased lending activity, thereby stabilizing (and stimulating) theeconomy at large. Regardless of whether one agrees with the logicand its assumptions, they are relatively explicit, and thus open toevaluation. In the case of the auto industry, on the other hand, theunderlying logic might be that intervention is necessary to preventsystemic failure; however, this logic does not lend itself to evalu-ation. What is success and what is failure? Is success based on thelack of failure of the two firms targeted for the intervention, or thsuccess of the auto industry as a whole, including the competitors othe two assisted agencies?

Indeed, in publicprivate configurations, public managers mustmonitor the impact not only on the targeted firm engaged in theconfiguration, but also on the larger economy that will be affectedby the intervention. Organizations operate as part of a larger orga-nizational field, and they respond to incentives and disincentivescreated by other participants in the field. o the extent that govern-ment extends its authority to shape the direction of a particularfirms success (or failure), it reshapes the success (or failure) of othermarket participants and the economy as a whole.

Finally, publicprivate configurations require the requisite capacity of

governmentboth organizational and human resource capacitytoinitiate, implement, and monitor the configuration toward the intendeimpact. As demonstrated through the ARP cases, this requiresclear identification of agencies with specific responsibilities, to be executed in line with clearly defined objectives and strategies. In eachof the cases, a reoccurring challenge is the multiplexity of imple-mentation actors with varying degrees of capacity and authority.From injecting capital into financial institutions to taking on theownership and risk of large auto companies, a first and essential taskis to ensure that the team on the ground is equipped with skilledplayers and a game plan. Both seem to be lacking to varying degreeacross the ARP initiatives.


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A further challenge is matching the strategiesand capacities of government with the strate-gies and capacities of the private participants.Private corporations are skilled at harness-ing the tools of government to create newprivate strategies and competitive advantagein the market. Te capacity of government,therefore, must be nimble enough to predictand respond to strategic behavior, while still operating under clearlines of accountability to the public. Te implications of the shiftingboundaries between the public and private sectors are both retro-spective and prospective. Retrospectively, policy makers, publicmanagers, and analysts need to monitor and adjust programs suchas those in ARP that are already being implemented to ensurerealignment with public interest, economic, and managementdimensions. Prospectively, policy managers, public managers, andanalysts need to evaluate the new programs and organizations beingproposed that further alter publicprivate configurations that affectmajor sectors of the economy.

While the degree of increased involvement by the federal govern-ment in the management of private firms by means of ARP is

substantial and perhaps unprecedented, the readjustment of theboundaries between the public and private sectors is by no meansover. A myriad of proposals are before Congress with the avowedpurpose of ensuring that the problems experienced in the economiccrisis do not happen again. Whether they are suited to the taskshould be the subject of careful analysis and debate. Careful analysisof the public interest, economic, and management dimensions willneed to be conducted to guide those deliberations. Lessons learnedfrom the publicprivate configurations implicated by initiatives suchas ARP can help inform these future decisions.

AcknowledgmentsTe authors wish to thank Matthew Potoski and the participantsat the 2009 Public Management Research Association Conferencefor their helpful comments, critiques and suggestions on an earlierdraft. Any conclusions or errors are solely those of the authors.

Notes1. Further, the largest firms (18 large bank holding companies) were evaluated un-

der the Capital Assistance Program to determine whether they had suffi cient capi-

tal to withstand upcoming economic events (referred to as stress tests. From this

evaluation, 10 firms were identified that need an additional $75 billion in capital

to bring them to financial health. Tis additional capital may come through

private or public funding under the Capital Assistance Program. As of July 2009,

6 of the 10 firms had already raised the additional needed capital through private

channels. Other firms had until November 2009 to raise additional capital.2. Te act encourages the federal government to promote maximum employment,

production, and purchasing power. Its mandates were reinforced by the Full

Employment and Balanced Growth Act of 1978. Te imperatives of these acts

no doubt infused the perceived need for the government to act when the finan-

cial crisis began.

3. Te Special Inspector General pointed to the consequences of the mischaracter-

ization of the banks as healthy: In addition to the basic transparency concern,

that this inconsistency raises, by expressly stating that the healthy institutions

would be able to increase overall lending, reasury created unrealistic expecta-

tions about the institutions conditions and their ability to increase lending

(SIGARP 2009a, 30).

4. Legislators often have a bias toward creating new

organizations under the supposition that the new or

ganization will pursue the stated program objectives

with greater vigor than would an existing organiza-

tion. Often, however, hopes for new agencies are

soon eclipsed by the realities of organizational life

in government. Start-up times and costs are often

greater than proponents foresee, and the lack of ex-

perience, expertise, and learning leads to a struggle rather than aggressive pursu

of policy priorities.

5. By the middle of March 2009, every key political appointee position, with the

exception of Secretary Geithner, was either vacant or awaiting confirmation.

By September 2009, almost a full year after the programs inception, only 13 of

33 reasury appointees had been sent to the Senate for confirmation, and only

seven had been confirmed (White House ransition Project n.d.).

6. Te program had a staff of 48 (only five of whom were permanent staff) as of

November 21, 2008, which grew to 90 (38 permanent staff) by January 26,

2009, and 166 (137 permanent staff) by June 2009 (GAO 2009b, 2009c). Te

reasury Department estimated that it would need 225 full-time employees to

operate the OFS at full capacity (GAO 2009b).

7. In addition to the AIFP, ARP also includes allocations to support auto supplie

(Auto Supplier Support Program) and automobile warranties (Auto Warranty

Commitment Program). Tese additional allocations total less than $6 billion.Te primary focus of this case study is the AIFP.

8. Te EESA states, Te Secretary is authorized to . . . purchase, and to

make and fund commitments to purchase, troubled assets from any financia

institution, on such terms and conditions as are determined by the Secretary

and in accordance with this Act, and the policies and procedures developed

and published by the Secretary (sec. 101[a][1]). A financial institution is

defined as [a]ny institution, including, but not limited to, any bank, saving

association, credit union, security broker or dealer, insurance company

(sec. 3[5]).

9. Te panel stated, reasury must be clearer, more transparent, and more

accountable in its ARP dealings, providing the American people with the

information needed to determine the effectiveness of reasurys efforts (COP

2009d, 5).

10. Te overall market for autos decreased from 16.1 million in 2007 to 10.6 mil-

lion in 2009. However, the domestic companies market share has been declinin

for several years. For example, General Motors market share fell from 27.2

percent in 2004 to 22.1 percent in 2008 (GAO 2009a).

11. Te auto team was to report to the ask Force and its co-chairs, who then woul

report to the president. Te reasurys auto team, which was actively involved

in recruiting many of the new directors who now sit on the new boards of

General Motors and Chrysler and articulated the goals, objectives, and manage

ment strategy of the governments involvement with the two companies, was

disbanded during the summer of 2009. Given that these were temporary (and

unconfirmed) offi cials, it is unclear what staying power attaches to their ar ticu-

lated positions. Nonetheless, the statements of the leaders of this team constitutthe governments statements about strategy.

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Conference Announcement

4th InternationalPublic Procurement Conference

August 2628, 2010Seoul, South Korea

Te Korean Public Procurement Service and an impressive list of international co-sponsors invite you to attend the 4th International Conference of Public Procurement(IPPC2010). Te conference aims to extend and deepen topics of interest by present-

ing contributions of theoretical, empirical, practical and institutional nature. Get moreinformation at:

http://www.ippc2010.kr

shifting boundaries between the public and private sectors: implications from the economic crisis

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