By Dana Milbank
Tuesday, March 17, 2009
As the crowd began to file into the East Room yesterday to hear President Obama's thoughts on the AIG bonuses, the pianist in the Grand Foyer of the White House struck up the tune "Killing Me Softly."
It was an apt selection.
AIG, the insurance giant at the core of the financial meltdown, struck again over the weekend, disclosing that it would use some of its $170 billion in federal bailout money to reward its employees with $165 million in bonuses. And 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. As Obama appeals for patience, his plans to stabilize the economy are at risk of being overtaken by a populist fury over the greed at AIG and in the rest of the financial industry. The president and his aides, armed with little more than their jawbones, seem powerless to stop the outrage.
A Pew Research Center poll out yesterday found that 87 percent of Americans are bothered by the bank bailout -- and that was before word got out about the bonuses at AIG, which was rescued by an earlier federal bailout. The rising anger helps to explain why Obama's towering support has slipped to mere mortal levels. The Pew poll put the president's support at 59 percent, down from 64 percent last month, while a CNN poll found Obama down 12 points from early February.
Obama has complained about "shameful" bonuses -- billions of dollars' worth -- for Wall Street bankers. He has admonished companies receiving the federal bailout that "you can't go take a trip to Las Vegas or go down to the Super Bowl on the taxpayer's dime." And yesterday, Treasury Secretary Tim Geithner used a podium at the White House to plead with banks: "You need -- you need -- you banks need to make the extra effort to make sure that good loans are getting to creditworthy small businesses, in order to serve the larger public good."
But the administration's bully-pulpit strategy isn't keeping pace with the spreading anger. Lawmakers erupted over the AIG news yesterday with demands for repayment and even a breakup of the insurance group. They were significantly more agitated than Obama's economic lieutenant, Larry Summers, who told ABC News on Sunday that the administration has "done everything it can do" to limit the AIG bonuses. Further, he told CBS, "we're not a country where contracts just get abrogated willy-nilly."
The willy-nilly Summers position was obviously untenable -- so Obama and Geithner tried again at yesterday's event with small businesses in the East Room. They arrived 20 minutes late for the event, where several seats were empty. Obama flashed a quick smile as he took the stage but then adopted a suitably grim expression. Geithner clenched his jaw so tightly his cheeks became discolored.
Geithner, the warm-up act, delivered what he said would be "a clear message to our nation's banks." But it wasn't all that clear. The only teeth in Geithner's message -- if they could be called teeth -- was that he was "asking" regulators to propose quarterly reporting of small-business loans, and that he would require banks receiving bailout funds to provide small-business loan figures in their monthly reports. Otherwise, Geithner was just begging. "We need our nation's banks to go the extra mile in keeping credit lines in place," he pleaded, tossing in a bit of guilt: "Given the role that many banks played in causing this crisis, you bear a special responsibility for helping America get out of it."
Obama picked up with the shaming and cajoling, this time directed at AIG. "This is a corporation that finds itself in financial distress due to recklessness and greed," he said. "Under these circumstances, it's hard to understand how derivative traders at AIG warranted any bonuses, much less $165 million in extra pay."
So what's he going to do about it? "I've asked Secretary Geithner to . . . pursue every single legal avenue to block these bonuses and make the American taxpayers whole."
But didn't Summers already say the administration has "done everything it can do"?
The riddle was left for White House press secretary Robert Gibbs to solve at his afternoon briefing.
"You guys first found about these bonuses last week?" ABC News's Jake Tapper asked.
"I think that's true, based on what I read in the newspaper," Gibbs replied.
"But you gave money to AIG" -- $30 billion more in taxpayer funds -- "two or three weeks ago?"
"Mm-hmm," Gibbs replied.
Why didn't Geithner find out about the bonuses before he gave AIG the money? "I'll ask the Treasury that," Gibbs offered.
Does Obama worry that the bonuses will further erode public support for the bailouts? "Well," Gibbs answered, "I think the president shares the concerns of millions of Americans."
But if 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.