The Note, 3/17/09: Risk Exposure — AIG bonuses leave Obama one step ahead of public rage

By RICK KLEIN Outrage? Check. Blame? Check Words? Check. Solutions? We’ll get back to you on that. You don’t have to check any definitions here to realize that President Obama is playing with matches — maybe the same brand that lit his own campaign fire. Even card-carrying members of the Republican cabal recognize the political power of these bonuses going to AIG executives — the ones whose contracts could not be questioned, taxpayer bailouts notwithstanding. The danger here for Obama is that his administration suddenly looks just like President Bush’s: at best, playing sideline critic as Wall Street gets its money — and public outrage boils. In this environment — until or unless the bonuses are canceled — is it possible to imagine the president getting another set of cash set aside to bail out big banks? How about another stimulus package? How about his budget? And healthcare and cap-and-trade and education reform? “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,” Michael D. Shear and Paul Kane write in The Washington Post.  “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. The populist anger at the executives who ran their firms into the ground is increasingly blowing back on Obama, whom aides yesterday described as having little recourse in the face of legal contracts that guaranteed those bonuses.” Flash back two weeks: “Yes,” said White House Press Secretary Robert Gibbs, asked by ABC’s Jake Tapper whether “you guys know what happened to the previous billions before you hand over this next $30 billion.”  They will know now — we presume. And Obama’s in a tough spot — if he can’t cancel the payments, the question that comes up will be, what can he do? Does he get it? “These spectacles, the public rhetorical floggings, have become teleplays, as predictable as a daytime soap opera, as comforting as a wet rock,” Time’s Michael Scherer writes. “As the event wore on, even Obama did not seem that into it, a surprising misfire for a politician who has long excelled at always striking the right tone at public appearances.”  Huffington Post pulls out the big, red, all-caps, bold-faced font: “OBAMA ADMINISTRATION ABOUT-FACE ON AIG”  What can be done? “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,” Edmund L. Andrews and Jackie Calmes write in The New York Times.  “The Treasury and Federal Reserve officials said they had known about the bonus program as far back as last fall,” they write. “The program has provoked public protests from a handful of critics and at least one Democratic lawmaker in Congress — Representative Elijah E. Cummings of Maryland, a member of the House Committee on Government Oversight, who demanded without success in December that A.I.G. provide information about the bonuses.” (One possibility: the value of the bonuses are deducted from future cash infusions.) “You bail it out, you own it,” Mother Jones’ David Corn writes. “Though these rewards were set up by contracts established before the feds showered AIG with taxpayer dollars, the Obama administration is in a position to get blasted for this. After all, it’s hard for the Obama White House to defend shoring up AIG with $170 billion in money from the Federal Reserve while its executives are scoring big.”  “These stories are going to absolutely hammer this administration. We need to get what is the plan on the table, to heal the patient. Otherwise, we’re going to have one of these stories every single day,” Tom Friedman said on ABC’s “Good Morning America” Tuesday. (And don’t miss his “Airplane” reference . . . ) Why you hear hollow ringing: “Several prominent Democrats are pointing out that Obama aides were more than willing to press auto workers to renegotiate contracts as a condition of bailouts for car companies — but are now citing the sanctity of contracts in AIG bonuses,” per ABC News.  “It betrays the exact problem that people are angry at — that there’s one set of rules for Wall Street and Washington and another set of rules for everybody else,” says liberal activist and author David Sirota.  “There is no public confidence in the process, and until you can restore that confidence, I think you’re just lighting money on fire,” says FireDogLake’s Jane Hamsher, on ABC NewsNOW’s Politics Live.  Not a huge drop — but remember who thinks polls are important: “A new poll by the independent Pew Research Center for the People & the Press has found that President Barack Obama’s popular support is eroding, with his approval rating dropping below 60 percent,” per McClatchy’s Steven Thomma. “Its new survey finds Obama’s approval rating falling to 59 percent from 64 percent in February. It also finds the ranks of Americans who disapprove of the president’s job performance rising, to 26 percent from 17 percent.”  Another piece of the argument, from The Wall Street Journal editorial page: “Given that the government has never defined ‘systemic risk,’ we’re also starting to wonder exactly which system American taxpayers are paying to protect. It’s not capitalism, in which risk-takers suffer the consequences of bad decisions. And in some cases it’s not even American. The U.S. government is now in the business of distributing foreign aid to offshore financiers, laundered through a once-great American company.”  What does this do to the next bailout that’s needed: “The criticism reflected not just the rising anger over the bonuses, but also the question the flap poses for the president and Congress: how to continue with plans to rescue the economy — which could include billions more dollars in taxpayer money to shore up banks and other interests — in the face of growing public disgust with corporate America,” per USA Today.  “News of the bonuses has threatened to stir a populist backlash against the rescue of AIG and other financial services, which in turn could raise voter concerns that the administration is squandering taxpayer money,” Peter Nicholas and Janet Hook write in the Los Angeles Times.  From the annals of post-partisanship, Gibbs, on Vice President Dick Cheney: “I guess Rush Limbaugh was busy, so they trotted out the next most popular member of the Republican cabal.” Even more from those same annals: “A spokesman for Americans United for Change said the group had consulted on strategy with Jim Messina, a White House deputy chief of staff and former Obama campaign official,” per Nicholas and Hook. “In addition, consultations on passing the president’s budget have been taking place between MoveOn.org and the White House public liaison office, headed by Valerie Jarrett, a close friend of the president.”  What the team is struggling to explain to its members: “The White House did not immediately explain how it might stop the $165 million in bonuses, or why it didn’t restrict the payments before giving AIG the latest round of taxpayer support,” The Boston Globe’s Michael Kranish writes. Plus: “Obama’s pledge yesterday stood in contrast to comments a day earlier by his chief economic adviser, Lawrence Summers, who said that the government could not simply order the company to violate the contracts.”  The suggestion from Sen. Chuck Grassley, R-Iowa: “I would suggest that the first thing that would make me feel a little bit better towards them [is] if they would follow the Japanese example and come before the American people and take that deep bow and say I’m sorry and then either do one of two things: resign or go commit suicide.”  What was Monday’s message supposed to be, again? “The reality is that the Obama team can be every bit as reactive and improvisational as any other political operation. And recent weeks have revealed some of the Obama operation’s signature tricks for fighting back when Washington storylines throw the president on defense,” Politico’s Jonathan Martin writes.  The president needs a way out of this: “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,” Jonathan Weisman, Sudeep Reddy, and Liam Pleven write in The Wall Street Journal.  Next front: “AIG Chief Executive Officer Edward Liddy will face a passel of angry lawmakers at a House Financial Services subcommittee hearing Wednesday,” Roll Call reports.  What else might we learn? AIG “may have to reveal more details of $165 million of bonus payouts after criticism by President Barack Obama and New York Attorney General Andrew Cuomo,” per Bloomberg’s Karen Freifeld and Hugh Son.  Another new front: “Some Wall Street firms are looking for ways to sidestep tough new federal caps on compensation,” Kate Kelly and David Enrich write in The Wall Street Journal. “In response to expected bonus restrictions, officials at Citigroup Inc., Morgan Stanley and other financial institutions that got government aid are discussing increasing base salaries for some executives and other top-producing employees.”  A float: “President Obama is considering a series of short televised addresses similar to Franklin Roosevelt’s fireside chats. Press Secretary Robert Gibbs has told the television networks that the administration may request more time than usual for a president. Gibbs did not provide a schedule but described the addresses as lasting about 10 minutes each,” Slate’s John Dickerson reports.  How will this cut? “President Obama is expected to name his first candidate to an appeals court seat this week, officials said, choosing David F. Hamilton, a highly regarded federal trial court judge from Indiana, for the appeals court in Chicago,” Neil Lewis reports in The New York Times. “The administration official said part of the reason for making the Hamilton nomination the administration’s first public entry into the often contentious field of judicial selection was to serve ‘as a kind of signal’ about the kind of nominees Mr. Obama will select.”  On Tuesday — happy St. Patrick’s Day. The president holds a budget meeting with top congressional Democrats, with comments to come at 9:40 am ET. Then it’s St. Patrick’s Day festivities: Obama and Vice President Joe Biden will meet with the Taoiseach of Ireland, Brian Cowen, in the Oval Office, at 10:50 am. Then comes a Shamrock Ceremony, and a meeting with Northern Ireland First Minister Peter Robinson and Northern Ireland Deputy First Minister Martin McGuinness. Then it’s House Speaker Nancy Pelosi’s St. Patrick’s Day lunch, and evening St. Patrick’s Day receptions in the White House East Room and the State Dining Room. Also Tuesday: It’s John McCain, the Twinterview (or is it Twitterview?). Call it what you want, but ABC’s George Stephanopoulos interviews Sen. McCain via Twitter — 140 characters or less for all the postings — at noon ET.    Elsewhere on the Tuesday calendar, 4 pm ET at the National Press Club: “Cindy McCain and Tom Daschle will join ONE members from across the country at an award ceremony in Washington, D.C. honoring the global anti-poverty organization,” per the press release. It’s the White House v. Cheney (and no, not about Scooter Libby this time). “Gibbs’s comments reflected the administration’s pique over Cheney’s wide-ranging remarks made Sunday on CNN, his first televised interview since leaving office,” Scott Wilson writes in The Washington Post. “The former vice president, deeply unpopular in opinion polls, accused the young administration of using the abysmal economy to push through a broad and liberal expansion of government and strongly defended Bush-era policies at home and abroad. The back-and-forth represented a political opportunity for the Obama administration, despite its pledges to avoid partisan confrontation.”  “Asked if he meant to be so harsh to a former vice president, Mr. Gibbs didn’t back down,” Christina Bellantoni writes in the Washington Times.  “Sometimes I ask forgiveness rather than permission,” Gibbs said. “I hope my sarcasm didn’t mask the seriousness of the answer.” (Former President Bush gives a closed-press speech Tuesday, in Calgary, Canada. Look for anti-war protesters — yes, still.)  In the Stewart v. Cramer bracket, fallout: ” ‘The Daily Show’ host Jon Stewart’s attack on the nation’s business media and his blistering showdown last week with CNBC anchor Jim Cramer could be another nail in the coffin of the mainstream media,” The Boston Globe’s Peter Canellos writes in his column. “It’s the second time this decade that the mainstream media have been accused of sleeping on the job. The first was the alleged failure to closely scrutinize the case for war in Iraq.”  Bob Shrum is worried about Obama’s prospects of achieving healthcare reform: “We’re told Obama won’t stop Congress if it decides to tax employee health coverage. That masterfully kills the proposal without offending its champions. Most liberal Democrats oppose it; Republicans say they won’t go along unless Obama explicitly advocates it,” he writes for The Week. “However, this episode reflects a wider danger — the tendency of Democrats to break ranks far more readily than Republicans do under a new President.”  Speaking of match-ups: “President Barack Obama. And Alaska Gov. Sarah Palin. Is this a very early pre-season matchup for 2012, at least moneywise?” asks Andrew Malcolm, in his Los Angeles Times blog.  The Kicker: “I am choked up with anger here.” — President Obama, coughing over his script in denouncing the AIG bailouts. “I’m like, ‘Kiss my fat ass!’” — Meghan McCain, tussling with Laura Ingraham, on “The View.” “Can I say ‘lighten up,’ or is that offensive too?” — Ingraham, in response, on her radio show. Follow The Note on Twitter: http://twitter.com/thenote For up-to-the-minute political updates check out The Note’s blog . . . all day every day:

http://blogs.abcnews.com/thenote/