Governing the Rage Over AIG
Obama clearly understands the problem and is struggling to find the right balance. After all, his warning against "governing out of anger" was an important part of his speech to Congress last month. But this is a gathering political force not entirely under his control, one that could derail his agenda and even his presidency.
To succeed, Obama will have to give voice to the furor of a nation justifiably angry about the careless risk-taking and wrongdoing that wiped out countless billions of dollars in wealth -- home equity, college savings, retirement accounts and rainy day funds of millions of people -- without allowing retribution that could wreck institutions that are essential to returning the economy to health.
The AIG bonus fiasco is just the most recent example of how understandable rage by Americans and members of Congress could metastasize into policies that could do considerable harm. Whether it can force AIG into curtailing those bonuses or not, the administration is about to unveil a new plan essential to shoring up the financial system -- which will mean billions upon billions more to keep banks and other institutions solvent and capable of lending.
That plan could be in genuine jeopardy. An argument can be made, for example, that like it or not, the AIG employees receiving the bonuses are exactly the people most qualified to defuse their own complex instruments, which are scattered across the financial world like landmines. So punishing AIG may feel satisfying, but could end up hurting in the long run. While the administration made a hash of the AIG bonus issue and now needs to address it, it also must present a plan that reassures Americans that the system can be made sound and policed so that future AIGs are impossible. (On the other hand, a number of people, Obama among them, argue that employees who helped drive the company into the ground clearly don't deserve bonuses and that there are plenty of people out there with financial knowhow these days in need of a job.) In the meantime, having a Sen. Charles Grassley, R-Iowa, make suggestions that AIG officials should follow the Japanese practice of disgraced officials literally falling on their swords may be useful to Obama as long as long as it doesn't lead to counterproductive legislation.
There's evidence Obama may yet succeed. A recent Pew poll shows that nearly half of the country backs efforts to rescue the financial sector, 48% favoring it and 40% opposed. Of that 48%, 45% are bothered by the idea -- making it clear that Obama may be able to sell the country on the necessity of saving the financial system from itself no matter how odious it may seem. However, it's also possible that those who are upset by the bailout could be tipped easily into opposing the bailout. That poll was taken before the AIG bonuses began making headlines, so it's not clear if they could change minds.
But Obama's gravest problem is not AIG or even the broader credit crisis. The the rage over the bonuses is simply the most recent symptom of a public fed up with a system that it believes is rigged against them. And unfortunately for Obama, that means the president has to not just rope one very angry bull but control an entire herd on the verge of stampede. Jon Stewart's attacks on the financial media on The Daily Show tapped into rage at Wall Street and some of its supposed watchdogs. A CNBC commentator tried to start a public mutiny against helping those faced with losing their homes, saying taxpayers shouldn't have to pay for others' mistakes. There have been numerous other explosions in past months over bonuses and auto executives flying to Washington on private jets. There was even a protest in Cincinnati over the stimulus package and huge budget bill that just passed Congress.
People simply don't need much reason to be angry and get angrier. The danger for Obama and the country is that these discrete episodes of rage by often different groups of people about very different issues could begin to blur and merge -- no longer resembling justifiably disgruntled citizens but an angry mob willing to lash out at virtually anything or anyone to find satisfaction, no matter how destructive.