Bracing for a bailout backlash
http://www.iht.com/articles/2009/03/16/america/16assess.phpWASHINGTON: The Obama administration is increasingly concerned about a populist backlash against banks and Wall Street, worried that anger at financial institutions could also end up being directed at Congress and the White House and could complicate President Barack Obama's agenda.
The administration's sharp rebuke of the American International Group on Sunday for handing out $165 million in executive bonuses — Lawrence H. Summers, director of the president's National Economic Council, described it as "outrageous" on "This Week" on ABC — marks the latest effort by the White House to distance itself from abuses that could feed potentially disruptive public anger.
"We've got enormous problems that need to be addressed," David Axelrod, Mr. Obama's senior adviser, said in an interview. "And it's hard to address because there's a lot of anger about the irresponsibility that led us to this point."
"This has been welling up for a long time," he said.
Mr. Obama's aides said any surge of such a sentiment could complicate efforts to win congressional approval for the additional bailout packages that Mr. Obama has signaled will be necessary to stabilize the banking system.
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As it is, there have already been moves in Congress to limit compensation to executives at banks and Wall Street firms that are receiving government help to survive.
Beyond that, a shifting political mood challenges Mr. Obama's political skills, as he seeks to acknowledge the anger without becoming a target of it. A central question for Mr. Obama is whether his cool style — "in a time of crisis, we cannot afford to govern out of anger," he said in his address to Congress last month — will prove effective when the country may be feeling more emotional.
Even as Mr. Summers was denouncing A.I.G. for the bonuses, he suggested that there was little if anything the government could do to stop them, seconding the conclusion of Treasury Secretary Timothy F. Geithner. But even if their reasoning was legally sound, they also risked having the administration look ineffectual in the face of what Mr. Summers said was the worst financial abuse of the last 18 months, since the economy began turning down in earnest.
"Never underestimate the capacity of angry populism in times of economic stress," said Robert Reich, a professor of public policy at the University of California, Berkeley, and labor secretary under President Bill Clinton. "A big challenge for President Obama will be to maintain a rational and tactical public discussion in the midst of this severe downturn. The desire for culprits at times like this is strong."
In a further development, A.I.G. on Sunday named dozens of financial institutions that benefited from its huge rescue loan from the Federal Reserve last fall. The list included Goldman Sachs, Merrill Lynch and Wachovia.
On Monday, the White House is expected to unveil proposals to help small businesses, an effort to make clear that the administration is not only focusing its attentions on Wall Street and big corporations like the automakers.
But the financial crisis is the most acute problem facing the administration, one it will not be able to play down. Christina D. Romer, the White House's chief economist, said Sunday on "Meet the Press" on NBC that the administration was close to unveiling details of its plan to remove the worst of the bad assets from the books of banks, a move sure to refocus attention on winners and losers from bailouts.
The disclosure that A.I.G., which has received $170 billion in government assistance to remain afloat and avert a cascade of failures in the financial system, is paying bonuses to its executives is the latest in a series of episodes that Mr. Obama's aides said seemed to be feeding a resurgence of public anger.
The public responded angrily to previous disclosures of large bonuses on Wall Street, to auto executives who flew on corporate jets to Washington for Congressional bailout hearings, and to last week's face-off between Jon Stewart of "The Daily Show" and Jim Cramer, the CNBC financial commentator, over the network's reporting on the crisis.
"There's unquestionably a strong populist surge out there," said Joel Benenson, Mr. Obama's pollster, citing his own polls and focus groups. "It's been brewing for close to four years. For the last two years, Americans were clearly indicating that they believe that one of the biggest obstacles to progress on America's toughest challenges — notably health care and energy independence — was the influence of special interests and corporate interests on the agenda in Washington."
