In my time in politics, I was often called a populist—and I don’t mind. To me, the idea is to confront entrenched interests and to build, as Al Gore said, “a stronger, fairer, more prosperous society.”
But the panicked spasm that drove Congress’s approach to the AIG bonuses represents a phony populism that wouldn’t even dent the systemic maldistribution of opportunity in America. The bonuses were both tone-deaf politics and indefensible policy. If the company’s CEO was unwilling to put a stop payment order on $165 million lavished on executives of the very AIG unit that had helped infect the global system with risky financial instruments, then he’s not worth the dollar a year he’s currently paid. But Congress’s rush to impose a 90 percent tax—not just on the AIG bonuses, but on bonuses at every enterprise receiving federal assistance—would punish sound financial managers along with irresponsible manipulators.
The tax couldn’t even be collected from British citizens who work in the London offices of American companies. Moreover, the tax provision—and the threat of more of the same—would be a disincentive to executives who make the right decisions and aid the restoration of credit markets and the financial system.
Instead of seeking a solution, Washington is searching for scapegoats. And in the present atmosphere, where psychic satisfaction trumps accountability or economic sense, the scapegoats aren’t limited to Wall Street. Two others are already in the shoot—Treasury Secretary Tim Geithner and Connecticut Senator Chris Dodd. The biggest one of all—President Barack Obama—has been positioned at the gate.
In February, Geithner was blamed for delaying the bank rescue plan when he decided that the blueprint on the drawing boards was defective. Evidently his critics believe that he should have pursued the financial version of the Rumsfeld approach—act first, think later. Then, he compounded his offense by failing to block the AIG bonuses—his critics aren’t quite sure how he should have—and he is accused of lying about what he knew and when. Alabama’s Richard Shelby, the ranking Republican on the Banking Committee, who hasn’t had a single constructive thought during the entire crisis, happily predicted that Geithner “won’t last long.”
Shelby is a paragon of responsibility compared to the House Republicans’ new shooting star, Eric Cantor, who offered the most demagogic and dangerous idea of all: stop the bailouts for AIG and perhaps other firms, thus risking another, even bigger, financial meltdown. As a member of a bankrupt party, it seems Cantor wishes a similar fate on the rest of us.
Rather than get bogged down in costly recriminations and cheap thrills, Geithner has announced a bank rescue plan that enlists private capital and is sensible and likely to be effective. He will soon shed his scapegoat status; sorry, Senator Shelby, Geithner will “last long.”
The road to redemption will be longer for Chris Dodd, who’s been blamed for doing the wrong thing because he tried to do the right thing. Just a month ago, he wrote an amendment into the stimulus bill that provided limits and oversight on Wall Street bonuses and golden parachutes. For his pains, Dodd was roundly attacked by financial executives who claimed his amendment was too restrictive. Later, an exemption for previously agreed payments was inserted into the legislation at the request of policy wonks and lawyers from the Administration. Everyone who’s ever worked on Capitol Hill knows how this works; legislation is vetted and altered in the last stages, usually by staff and often late at night. The change permitted AIG’s bonuses—although Dodd continued to be assailed by many on Wall Street.
Dodd is now scorned for being “bought” by campaign contributions from AIG executives. In the style of the Red Queen in Alice in Wonderland—first the verdict, then the trial—he’s been pronounced guilty for facilitating the bonus abuse he tried to prevent. Dodd, for whom I was a strategist and media adviser in 1998, seems doomed to remain a scapegoat until the end of his 2010 re-election campaign. By then, the facts may at last catch up with the smears.
A third scapegoat headed for the shoot this week is Barack Obama. New York Times columnist Frank Rich, who often captures the deeper meaning of events, misfired this time, labeling the AIG episode Obama’s “Katrina moment.” The President’s offense was insufficient anger, compounded by his decision to rely on financial experts like Geithner and White House economic adviser Larry Summers. Is Obama instead supposed to call on Joe the Plumber?
Rich at least gave Obama credit for taking responsibility—“more than he needed to, given the disaster he inherited.” Other critics were not so measured. How dare Obama talk to Jay Leno in this time of economic distress—even though Obama used his “Tonight Show” appearance as a kind of fireside chat to explain his policies in clear and colloquial terms. How dare he laugh on “60 Minutes” when he ruefully noted the streams of conflicting advice that pour in everyday.
One of Obama’s greatest strengths, however, is that he keeps his cool. He’s calm and centered on the big issues. He defended Geithner even before the markets validated the Treasury Secretary as the 497-Point Man on Monday. The President knows, as he’s said, that he’ll be judged by “results.” And to achieve results, he’s willing to resist the distractions and expedient excesses of anger that could impede progress. If the Republicans were as mature, they might finally come to understand that politics has to stop at the edge of the financial cliff. And maybe the rest of us could decide that if Barack Obama can keep his cool, then we can keep ours.