Obama Caught In The Eye Of AIG Storm

WASHINGTON, DC: President Barack Obama's decision to voice outrage as a populist fury rages over taxpayer-funded AIG's bonus binge may have been an act of simple political self preservation.

But, analysts warn, that once enflamed, public opinion can be difficult to douse, and could complicate the administration's attempt to sell a forthcoming plan to spend billions more dollars to cleanse banks of toxic assets.

And the administration has so far struggled to convince lawmakers it knows how to get the 160 million dollars back from crippled American International Group, raising questions about its political potency.

Obama is "in a very tough spot," said Bruce Buchanan, a professor of political science of the University of Texas at Austin.

"There is a sense of confusion and anger that ordinary people are suffering and these various bankers and insurance brokers are dipping at the trough."

The president warned Congress last month, "in a time of crisis, we cannot afford to govern out of anger, or yield to the politics of the moment."

But the AIG affair forced Obama to choose whether to publicly adopt the anger of Americans flailing amid the worst recession for decades or to come across as aloof and toothless by saying the government had no power to act.

He chose the first option, branding the bonuses Monday as an "outrage" and telling Treasury Secretary Timothy Geither to do everything under US law to get the money back from a firm on $180bn of taxpayer life support.

Doing nothing would have been "untenable" but playing the populist card also has a price, said University of New Hampshire political scientist Dante Scala.

"Once you put down that marker, voters are going to hold you accountable," he said.

Julian Zelizer, a political historian at Princeton University, agreed Obama had no easy way out.

"He can come out and say it is bad and reprimand executives--it is another thing to formulate some kind of policy response."

But by sharing populist anger over AIG, Obama may be making it more difficult to get the public on side in his bid to bail out the banks--a step many economists say is vital to economic recovery.

A CBS poll on Monday found only 37 percent of Americans back the government pumping money into banks and the financial sector to save the economy.

Republicans meanwhile see the AIG affair as a chance to erode the new president's political capital.

John Boehner, the Republican minority leader in the House of Representatives, noted that the White House had once expressed confidence that taxpayer money being given to AIG was being well spent.

"I think this is outrageous, and I think the American people are rightly outraged that their tax money is going to pay bonuses to the very people that got this company in trouble," Boehner said.

In the game of Washington politics, any day lost to a distraction like AIG is felt elsewhere.

Obama had hoped Monday to focus on his plans to help small businesses but his populist swipe at AIG stole the headlines. Tuesday's bid to focus on the budget was also lost in the commotion.

The outrage is also shining an unwelcome spotlight on Geithner: the White House had to express "complete confidence" in his Treasury chief on Tuesday.

Critics have argued that Geithner, already accused of underwhelming on the banking rescue, should have done more to halt the bonuses, before doling out a fresh $30bn rescue handout to AIG earlier this month.

"He either knew or should have known about what was going on," said senior Republican Senator Richard Shelby on CBS on Tuesday.

Geithner won praise as a financial wizard when he was picked, but some critics are now beginning to question his political skills.

"There is some kind of communication problem here," said Zelizer.

"In the campaign, the president was very good at responding to crises," he said, refering to Obama's elegant speech on race after a furore erupted over his fiery former pastor Jeremiah Wright.

"But now he is running a government. It is not just him any more--some of Obama's (top aides) don't seem as skilled in the political arena as they are in the economic arena."

One boon for Obama however has been the recent rally on Wall Street, which may have eased some political pressure.

And a new Pew Research poll Tuesday showed his approval rating at 59 percent, though that figure slipped five points from February. (By STEPHEN COLLINSON/AFP)

MySinchew 2009.03.18


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