By Dan Froomkin
1:12 PM ET, 03/17/2009
Barack Obama, who rose to power based at least in part on his calm, cerebral and empathetic nature, now risks falling out of sync with the electorate because he's not a vindictive man -- and the nation is in a vindictive mood.
The current wave of public outrage over bonus payments paid by AIG may well recede quickly. But populist anger doesn't play to Obama's strengths -- and at the very least distracts attention from his agenda.
Obama wanted us to be talking yesterday about his plan to help get credit flowing to small businesses. He wanted us to be talking today about his renewed pitch for his budget proposal -- and maybe about his Irish heritage. Instead, all we seem to be able to talk about is AIG.
The whole bank rescue issue is, in fact, something of a political loser for Obama -- as it would be for any president. In the best-case scenario, we spend billions to return the credit markets to how they used to be. In the meantime, the massive dollar amounts, the incredibly complicated landscape and the inevitable compromises involved make him hugely susceptible to attacks from the left, from the right, and from cynics of all persuasions.
Obama is certainly a populist in a lot of ways -- he campaigned as a champion of the little guy, his policies are intended to reverse the recent redistribution of wealth toward the wealthy, and he is making a variety of efforts to stay connected to average Americans.
But this isn't the first time he's been slow to embrace a growing populist anger. You may recall how back in late January, he initially responded quite discreetly to the revelation that executives at Citibank -- who received a $45 billion infusion of tax dollars -- were about to take deliver of a $50 million corporate jet. (He eventually expressed high dudgeon.)
I speculated at the time that he was overly focused on not upsetting Republicans and Wall Street. Now I wonder if it's some combination of other factors, one of them being the overall slowness to anger that, as we've seen in the past, lets him brush off criticism and reach out to even the most antagonistic political opponents. Another possible factor is that he continues to surround himself with economic advisers who come from the Wall Street culture where what the rest of us would consider obscene payments under any circumstance have been rationalized for years now.
In any case, the sequence of events revolving around the AIG bonuses just does not reflect well on his administration, from its initial lack of sufficient outrage to what now appears to be an utterly unpalatable resolution:
Edmund L. Andrews and Jackie Calmes write in the New York Times: "President Obama and his top economic advisers scrambled to calm a nationwide furor on Monday over bonuses paid at the American International Group, even as administration officials acknowledged they had known about the issue for months.
"One day after the economic advisers insisted that their hands had been tied by contracts requiring the payments, Mr. Obama ordered the Treasury Department to 'pursue every single legal avenue to block these bonuses' and make the American taxpayers whole...
"But as anger from lawmakers escalated and criticism of the retention bonuses overshadowed other news for a second consecutive day, White House and Treasury officials offered only a general sense of how they would carry out Mr. Obama's order and few explanations for why they had not acted earlier.
"White House officials said the Treasury would recapture the bonus money by writing new requirements into a $30 billion installment of government aid scheduled to go soon to the ailing insurance conglomerate. The government has already provided $170 billion in taxpayer assistance to keep A.I.G from failing and now owns nearly 80 percent of the company.
"But administration officials conceded that almost all of the most recent round of bonuses, totaling $165 million, had been paid last Friday, one day before the Treasury publicly acknowledged that it had reluctantly approved the payouts. The officials said that people who received the bonuses would probably be able to keep them.
"By seeking to link repayment of the bonus money to the coming $30 billion in assistance, the administration seemed to leave open the possibility that the company would effectively be repaying taxpayers with taxpayer money. A Treasury official disputed that taxpayers would be repaying themselves, but could not specify how else the company would give back the money."
Jonathan Weisman, Sudeep Reddy and Liam Pleven write in the Wall Street Journal: "The confusion that seemed to mark the White House's AIG response Monday illustrates the bind that Mr. Obama finds himself in. He needs to convince Americans he shares their mounting fury over the hundreds of billions of taxpayer dollars being pumped into companies like AIG. At the same time, he needs the executives and employees of those companies to help the government untangle the current financial mess....
"White House aides said that administration officials had been consistent in their statements on the issue over the past few days. But the tone did appear to shift. Appearing Sunday on ABC's 'This Week,' the president's top economic adviser, Lawrence Summers, called the bonuses 'outrageous,' yet left the impression that little could be done. 'The easy thing would be to just say, you know, 'Off with their heads,' and violate the contracts,' he said. 'But you have to think about the consequences of breaking contracts for the overall system of law.'
"A little more than 24 hours later, the president seemed to promise much bolder action. Then by late afternoon Monday, White House and Treasury officials echoed the Summers position that nothing could be done about payments already made."
Here's what Obama had to say about AIG yesterday.
"[I]t's hard to understand how derivative traders at AIG warranted any bonuses, much less $165 million in extra pay. I mean, how do they justify this outrage to the taxpayers who are keeping the company afloat?...
"I think [AIG CEO Edward] Liddy and certainly everybody involved needs to understand this is not just a matter of dollars and cents. It's about our fundamental values. All across the country, there are people who are working hard and meeting their responsibilities every day, without the benefit of government bailouts or multi-million dollar bonuses. You've got a bunch of small business people here who are struggling just to keep their credit line open -- that they are foregoing pay, as one of our entrepreneurs talked about, they are in some cases mortgaging their homes, and doing a whole host of things just in order to keep things afloat. All they ask is that everyone, from Main Street to Wall Street to Washington, play by the same rules. And that is an ethic that we have to demand."
The words were effective. But his demeanor, and the context, were his undoing.
Dana Milbank writes in his Washington Post column: "Obama was left looking like a pitiful giant as his aides explained that there was absolutely nothing they could do to stop the obscene payouts -- even though the government owns 80 percent of AIG.
"As the president read from his teleprompter yesterday about 'this outrage to the taxpayers who are keeping the company afloat,' he developed a tickle in his throat and tried to clear it. 'Excuse me,' he joked. 'I'm choked up with anger here.'
"But not enough....
"[I]f the president wants to keep ahead of the public fury, he'll need to do more than share the concerns; he'll need to act on them."
Washington Post opinion columnist Eugene Robinson blogs: "When the president was a candidate, his staff referred to him as 'No Drama Obama.' That's the way he is: cool, steady, no histrionics, no distractions, keep your eye on the ball. This is a moment, however, when he ought to get in touch with his anger -- and let everyone witness the encounter.
"Americans are well ahead of their political leaders in their outrage at the greed and irresponsibility of the preening Wall Street 'geniuses' who wrecked the economy. The White House obviously has realized that in order to orchestrate a recovery -- which will surely necessitate another bailout, however it's framed -- the president will have to get out in front of the public's anger and try to channel it in the directions he wants it to flow. Confronted with the egregious AIG bonuses, Obama did the right thing: He came out before the cameras and told everyone how outraged he was.
"But righteous anger doesn't seem to come naturally to him. I happened to read his prepared remarks before he delivered them, and they looked plenty wrathful. When he spoke, though, he sounded… analytical. Unruffled. Reasonable....
"When he coughed and said 'Excuse me, I'm choked up with anger here,' he almost seemed to adopt an air of ironic detachment. Believe me, Americans aren't feeling ironically detached about much of anything right now."
Mike Madden writes for Salon: "If there's any point the bonus brouhaha should drive home, once and for all, inside the Beltway, it's that the financial collapse has gone way past the point of 'shame on you.' Unless the government gets tougher with the banks it now owns huge stakes in, the Obama administration itself may be soon be bellowing 'shame on me.'"
So how serious a political problem is this for Obama? Enormous, according to the front page of the Washington Post.
Under the heading "An Imperiled Agenda", Michael D. Shear and Paul Kane write: "President Obama's apparent inability to block executive bonuses at insurance giant AIG has dealt a sharp blow to his young administration and is threatening to derail both public and congressional support for his ambitious political agenda.
"Politicians in both parties flocked to express outrage over $165 million in bonuses paid out to executives at the company, demanding answers from the president and swamping yesterday's rollout of his efforts to spark lending to small businesses....
"White House aides grasped for actions that could soothe sentiment on Main Street and in the halls of Congress, where the fate of the new president's sweeping agendas on health care, climate change and education will be decided....
"But the damage control did not seem to satisfy incredulous lawmakers in both parties, who said the image of financial executives taking huge bonuses from a taxpayer-funded rescue puts the president in a politically impossible position....
"The Obama administration was already facing a skeptical public and members of Congress critical of the huge sums of money the government has allocated to shoring up the devastated financial system.
"News of the latest AIG bonuses only compounded the political problems that the huge expenditures pose for the president."
It's true that, as Shear and Kane note: "House Minority Leader John A. Boehner (R-Ohio) said the bonus issue added to his belief that there will be almost no Republican support for any expansion of a bank-bailout program that passed Congress last fall with broad bipartisan support." (Although was anyone counting on much GOP support for anything Obama proposed right now?)
And some 79 House Democrats wrote an angry letter to Treasury Secretary Timothy Geithner yesterday asserting that "using taxpayer funds from the Wall Street bailout to pay bonuses completely undercuts the President's goal....
"These kinds of abuses of the public trust will only threaten any future efforts by President Obama's Administration to intervene in the financial markets. For the sake of the President's ability to continue to take the steps that may be necessary to rebuild our economy, there must be a stronger response than simply decrying this development."
But I think this may just be the latest in what Washington Post media critic Howard Kurtz so correctly calls "the daily drumbeat in the punditocracy...that Obama who promised so much hasn't made much headway."
Kurtz explains: "First he was blamed for the plunging stock market, until there was a slight rebound. Then he was roundly criticized for trying to do too much at once, a theme that was reprised Sunday on 'Meet the Press.'
"And now the august chroniclers of the MSM are raising questions about whether our new president knows what the hell he's doing....
"The president is pushing a big agenda that is, of course, fair game. But it seems to me he's stuck in an uncomfortable limbo. He inherited huge problems that forced him to start drafting economic legislation even before taking the oath. He rammed through a huge stimulus plan in record time and unveiled a new bank bailout plan. But even under the best of circumstances, these efforts are going to take time to show results."
Is there anything else Obama could do, regarding AIG?
Andrew Ross Sorkin makes the case in the New York Times that the president has little choice: "A.I.G. built this bomb, and it may be the only outfit that really knows how to defuse it."
But Jim Puzzanghera and Tom Hamburger write in the Los Angeles Times about a more assertive approach: "New York Atty. Gen. Andrew Cuomo, whose office has been investigating AIG's executive compensation packages, is trying another approach in pursuit of the bonus money....He's trying to determine whether AIG committed fraud in agreeing to the bonuses early last year despite growing multibillion-dollar losses that would have prevented them from being paid."
And Roger Lowenstein writes in his Bloomberg opinion column: "The company says it's afraid of being sued. But contrary to what lawyers and legalistic bureaucrats will tell you, there are worse things than lawsuits. Stiffing taxpayers to pay gluttonous derivatives traders -- and in the midst of an economic crisis -- is among them....
"Seven employees will get at least $3 million and one will get $6.5 million....
"Assuming the checks haven't been cashed yet, here is what Geithner should say to Liddy: 'Sorry, Ed. We'll keep track of what we promised, and maybe in a couple or three years, if AIG is earning money, and a pool exists (outside of taxpayer funds) to pay bonuses, then OK.'
"If its traders end up suing to get their full bonuses, the company (and the government) could claim that the promised bonuses were a 'fraudulent conveyance.' This defense is usually employed in bankruptcy cases. Under the theory of fraudulent conveyance, it is illegal to transfer assets that are needed to pay creditors. So, if the owners of a highly leveraged company give themselves a big dividend, leaving the corporation unable to service its debts, the creditors can sue to reclaim the funds."