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Posted by on Mar 18, 2009 in Economy, Politics | 1 comment

Obama And AIG: No More Mr. Nice Guy?

On a day when the initials “AIG” were becoming almost as familiar to the average American as the initials “MTV,” President Barack Obama did a town hall meeting in Costa Mesa — a meeting sure to get local media coverage, national coverage and provide sound bites galore for news shows, talk radio hosts and blog embeds. And one thing seemed clear before he left and once he got there:

If some politicos and pundits on both sides were concluding that perhaps they were wrong and Obama was perhaps more hype than clout, Obama was sending out signals that (a) he’ll take stronger stands in the future, (b) he is adept at using the town hall format as a bully pulpit and intends to use it and (c) he is clearly thinking of more than one term so he has several motivations to take future stronger stands. You can see a shift in watching some of the news coverage and speech excerpts.

For instance here’s what he said before he left:


Watch CBS Videos Online

And then in Costa Mesa:

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The full text of his townhall meeting is HERE.

So it’s clear Obama plans to take strong, public stands that will be quotable in news cycles — and he does so in a political context where this could work to his benefit: a new Gallup Poll finds Americans outraged over the bonuses paid to AIG bigwigs:

Three in four Americans (76%) want the government to take actions to block or recover the bonuses insurance giant AIG paid its executives after receiving federal bailout funds….” In the Tuesday night Gallup Poll, 59% of Americans said they were personally “outraged” by the bonuses. One in four (26%) said they were “bothered” and just 1 in 10 (11%) said they were not that bothered.

All in all, when the responses to the two questions are combined, the results show that a majority of 55% of Americans are outraged and want the bonuses blocked or recovered, while another 21% are not outraged but still want the bonuses blocked.

One of the mysteries about Barack Obama would be whether he’d be a centrist, a leftist, a behind-the-scenes political powerhouse, a populist or a wimp. The statements today, coupled with another town hall meeting slated tomorrow as well as an appearance on Jay Leno’s late night TV show, suggest there may be times when he’ll be defined in each of these categories — but that overall this will be a populist White House and populist President.

Marc Ambinder flatly says “The Gloves Come Off,” as he points to White House chief of staff Rahm Emanuel’s statement that above all Obama has to stabilize the economic system. Ambinder sees the same kind of shift we note above:

Today, Obama seemed to indicate the Era of Good Feeling is over. “Just as outrageous,” he said, is the “culture that these bonuses are a symptom of a situation where excess greed, excess compensation, excess risk-taking have all made us vulnerable and left us holding the bag.” He addressed Wall Street directly: “As we get out of this crisis, as we work towards getting ourselves out of this recession: I hope that Wall Street and the marketplace don’t think we can return to business as usual.”

This is more than tough rhetoric: I take this to mean that the administration will use the AIG crisis to take a more active role than it otherwise would have. Wall Street has been waiting for the Treasury Department’s plan to mitigate the poison and the credit-market-locking effect of toxic assets held by major banks. The administration’s economic commanders would prefer to create public-private partnerships to remove those assets from the books of especially troubled institutions; the government and corporations would share the risks. When Obama says explicitly – “My interest is not protecting the banks,” he’s scaring that capital away. Why would a hedge fund want to subject itself to the scrutiny that AIG is currently receiving?

…I don’t believe the administration is worried about rhetorical overkill, either; what they don’t want is a singular focus on AIG. Democrats seem incapable of explaining why the bonus codicil was added to the stimulus package, and so there’s a danger of backlash if the public decides to blame the party in power.

…Several senior administration officials explain the reasoning this way: they believe that Wall Street and the financial industry have no credibility with the American people; every day, with every new revelation, Old Capitalism (my phrase) discredits itself. The public may be skeptical of particular solutions, but they have faith in Obama’s ability to dictate the terms of the recovery.

There is growing outrage among Americans (the polls), which politicos of both parties are sensing so they’re responding in Congress. As both sides point at each other for past or present complicity or enabling of the bonuses — the latest is Sen. Chris Dodd points to Obama treasury officials as wanting the bonuses to be allowed due to fears the government could be sued — someone who can strongly articulate public outrage, demand, and use clout to bring some changes could enjoy great support.

Obama is positioned for it and motivated to do it (his poll numbers are going down). He has the bully pulpit, he knows how to use the new and old media. The outcry over AIG could both hurt Obama’s budget plans — yet help him, since there will be extra attention riveted on him as he continues to do a full court on his budget proposals:

Mr. Obama’s trip to California was planned before the explosion over A.I.G. bonuses last weekend. But he clearly appeared to relish the opportunity to talk about something different.

“It’s always good to get out of Washington for a little while and come to places like Costa Mesa, because the climate’s a lot nicer and so is the conversation,” Mr. Obama said.

The Costa Mesa visit — to be followed Thursday by trips to Los Angeles and Burbank, where he will tape “The Tonight Show with Jay Leno” — is part of the White House effort to sell the budget to America before the expected fight in Congress.

The White House announced Wednesday that Mr. Obama will hold another prime time news conference at 8 p.m. Tuesday. He may touch on his Afghanistan strategy review and scheduled trip to Europe for the Group of 20 and NATO summit meetings. But his primary focus, aides said, will be to push his economic agenda.

Meanwhile, Fox News’ Shepard Smith has lambasted the Congress, Chris Dodd and the White House for stripping a measure from the stimulus bill that would have nixed the bonuses.

And there’s another interesting factor emerging in this controversy:

New York’s Attorney General Andrew Cuomo seems to be the politico who has been most front and center in taking the lead to not just channel voter ire but use the full clout of his office. If some see Obama as a combination of JFK and Reagan (or Bill Clinton and Jimmy Carter if you’re a Republican), Cuomo is achieving the aura of a modern Teddy Roosevelt. Cuomo is the one emerging as AIG’s true legal and political nemesis.
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The AIG saga — minus the ringing words in Congress — has seemingly boiled down to Cuomo going after AIG in court while Obama makes strong statements and members of Congress rant in hearings and on TV even more than the blogosphere.

Here are just a few headlines involving Cuomo’s role:

–NY’s Cuomo: AIG should immediately turn over exec bonus list
Cuomo pushed AIG to return $s
And this from the AP:

If anyone could emerge from the AIG bonus debacle looking good, it could be New York Attorney General Andrew Cuomo (KWOH’-moh).

He’s winning praise for strong-arming the insurance giant for details on $165 million paid to dozens of executives.

His hard-charging ways have some observers asking why Washington bureaucrats haven’t been as aggressive. AIG is being criticized for paying bonuses after taking bailout money.

Which raises the question:

Could this be the second President in a row who has been upstaged and outshone by a more assertive New Yorker during a massive crisis?

Some blog reaction:
Time’s Justin Fox on Treasury Secretary Timothy Geithner’s role in sticking in a provision protecting the bonuses:

My own thought: Geithner simply hasn’t seen stuff like the AIG bonuses as a priority. He figured his priority was fixing the banking system, and the bonuses were a side issue. This explains why the man would never be able to get elected to office. I don’t think it necessarily makes him a bad Treasury secretary. A lot of people in Washington disagree with me on that. But it’s not like any of them acted on the information available on the AIG bonuses in a timely fashion either.

Chris Bowers:

As such, on behalf of the Obama administration, Tim Geithner and Larry Summers joined with congressional Republicans to block legislation that would have retroactively blocked the bonuses. This was done in the hope of securing more private participation in the administration’s public-private partnership bailout plan.

This scandal is the direct outcome of Geithner’s bailout plan. Because the Obama administration is pursuing a public-private partnership bailout strategy, and because Wall Street wouldn’t participate in this plan if their bonuses were threatened, the Obama administration blocked legislation that would have blocked Wall Street bonuses. They really should have pursued temporary nationalization instead.