Why The Obama Administration Underestimated Public Outrage Over AIG?

No one can blame the Obama Administration for apparently misreading the level of public rage toward AIG executives, who have collected millions in bonuses while racking up billions in taxpayer bailout money.

The president's chief economic adviser, Larry Summers, did not exactly shrug off the issue of AIG bonuses in an interview over the weekend. But he accepted without protest that the administration would probably have to make good on a contractual agreement. How could Summers had known on Saturday when he spoke matter-of factly about the bonuses that on Monday AIG would need to post guards outside its Connecticut headquarters because of the multiple death threats flooding employee email boxes. How could he have known than that this is the issue that could effectively torpedo President Obama's efforts to rescue the economy by floating massive companies like AIG and its banking partners?

Why should Summers and Treasury Secretary Timothy Geithner have thought otherwise when most of us went along blithely with corporate practices of the past decade that would be described as corruption in many other parts of the world?

Take for example the 3.6 billion in questionable bonuses to Merrill Lynch executives a few months ago as the bailed out financial management firm was being taken over by Bank of America. That payout makes the AIG reward for failure look like a tip at McDonalds. Seven Merrill Lynch executives each received a bonus of more than $10m for 2008. But compared to the current AIG debacle the public response at the time amounted to slight irritation, not fury.

In December 2005 Exxon head, Lee Raymond, received a $400 million-plus payout when he retired, including pension, stock options and other perks. While the public expressed concern (not outrage) over surging gas prices that year, Raymond, according to ABC-TV, also raked in a "$1 million consulting deal, two years of home security, personal security, a car and driver, and use of a corporate jet for professional purposes." But there was very little noise about this from Joe Six-Pack. Shareholders hit pay dirt, so quite a few commentators defended the Exxon payout. Members of Congress, under siege from constituents about rising oil prices, were visibly upset. Many other Americans merely shrugged in a kind of libertarian acceptance that would make Ayn Rand smile.

A friend from London not long ago asked me rhetorically "What would it take to get Americans off their couches; to stop screaming at the talking heads on CNN and Fox and to start screaming at the top of their lungs--in-person--at the banking CEOs, Wall street executives, predatory lenders and boards of directors who helped create the economic mess the world is in?"

What would it take, he wrote, "...to get Americans to protest peacefully alongside neighbors, friends, fellow students, congregants, immigrants, the jobless and the gainfully employed (for now)?" Under what circumstances "would they take off their shoes (or bring along an older pair) and toss them as hard as they could at the buildings, skyscrapers, offices and entrances to the plutocratic symbols of growing inequality in the nation?"

Would some be willing to spray paint the letter "V" (yes, for vendetta, he said) "...on the Greenwich and Palm Beach mansions of executives who bankrupted entire companies, laid off thousands, took tax-payers money, gave themselves bonuses, and are now asking for billions and billions more of tax money in return?" What would it take, he asked, to get Americans to say along with thousands of others, "I'm mad as hell and I'm not going to take it anymore"? Perhaps the answer is AIG. Perhaps Not.

Millions poured onto the streets of France and England in recent months to protest diminishing wages and corporate excesses. Thousands were on the streets of Guadeloupe last month complaining about mass joblessness. Tens of thousands rallied peacefully in Greece this winter, though some arguably took their protests too far.

By comparison, based on reported calls, emails and on-line viewer comments to CNN, huge numbers of Americans were up in arms over the Octuplet Mom, with some even sending death threats her way. Other spurts of demonstrable passion have occurred when millions of callers over the years have lighted up the boards at the Fox Network demanding the heads of American Idol judges who shoved popular contestants out the door. On the political front, Americans demonstrated enough anger at one of our all time favorite scapegoats -illegal immigrants -to form entire new grassroots organizations against them. For example, at its onset, several thousand volunteers joined the right-wing vigilante "Minutemen" to "patrol" America's borders. As long as undocumented immigrants were reaping the scorn of ordinary Americans, rapacious lenders and companies engaged in questionable business practices needed not fear.

In the 21st Century organized mass anger (i.e. something much, much bigger than a picket line) was rarely directed at the economically privileged. While progressives and liberals protest corporate extremes all the time, they have done so in relatively small numbers. Perhaps the most spirited action in years took place in Chicago in December when laid off workers at the Republic Windows and Doors plant took over the factory after it was closed abruptly under financial pressure from Bank of America. The demonstrators demanded that the company follow-through on payment of vacation and severance packages that were owed to 250 employees. The employees ultimately won a major victory, but their action was quickly overshadowed by news of a renegade Illinois governor and the ever rampaging economy.

On the right-side of the ideological divide, conservative-talk-radio and Fox News serve as sounding boards for a large reservoir of white middle-class angst. But the daily dosage of demagogic delirium oozing from the pores of these medium have mainly served to whip up anger against the beneficiaries of President Obama's economic stimulus package and the President himself.

Even so, by now you would have thought that thousands, perhaps millions of Americans of every political stripe would have marched on Wall Street against institutionalized avarice in the form of massive impossible-to-justify executive compensation and bonuses. But clearly the vast majority of Americans are not quite THAT angry.

If they were, there is little doubt that Lawrence Summers and company would have put the brakes on AIG bonuses weeks ago--the contract be damned.

Now comes word that unions around the country are calling on thousands of Americans to demonstrate on March 19th in front of specific banks that have come to symbolize the culture of greed. If thousands upon thousands actually show up to vent their anger, mark March 19th as a watershed day; as the moment when ordinary Americans finally rejected the Masters of the Universe culture in favor of fair and rational compensation policies.

Comments

[mjc]

The sign the union member is carrying in the blog above says it all: "You got bailed out: We got sold out". Team Obama really doesn't believe that the problem is that of the big corporate interests such as AIG, Bank of Am, Citicorp, Merrill Lynch, Goldman Sachs, etcetera, etcetera, down the line. Guys on team Obama worked for Goldman Sachs, believe in the corporate model of citizenship. Geithner has even twice repeated on tv that "people borrowed too much", "people took out loans they couldn't repay", as if you just walk into your nearest bank and ask for a mortgage and sign on the dotted line and get it! There is no mention of the derivatives, the hedge funds, the trusts which encouraged and never...it seems....ask questions, and sold the mortgages for profit.

[Carlyhas3]

While the outrage is truly warrented, I am a bit concerned by the rantings of Dodd, Schumer and Frank to write new tax law just to take away these bonuses. When Congress wants to break legal and legimate contracts (no matter how repugnant they may be to us!) and use taxes as "punishment", where wil it stop?

None of us know how these families may be living! My hubby is an IT exec. He gets a very small salary and gets a bonus at the end of the year (not now tho, bonuses and salary increases have been on hold for 1 year and won't be passed out until maybe 2011!). When we work out how many hours he works (at least 70 per week, even in the wee hours of morning!) and then figure out his salary - he is cheap labor! and would be better off at a lower level/paying job.

Maybe one day, Congress will decide that my hubby makes too much in bonuses and salary. Perhaps Congress will decide to tax all IT execs because, well because the public is outraged that IT execs get more money than the burger-flippers. AIG is an outrage in itself but, conjuring class warfare and writing up punitive tax law is NOT the answer. Put on your tinfoil hat and think where this might lead......

[DemocratByDefault]

The very second Obama appointed Summers and Geithner, I knew this is what we were in for. Obama apologists claimed that we should give the administration a chance and that Obama set the policy and the Wall Street pair would follow his lead. This is Obama's lead or Obama is too concerned with pragmatism to reign in his financial folks, either way is bad news for the economy. It appears we are in for a long, long recession because Wall Street is looting the booty before the ship sinks and we are left like rats on that sinking ship.

[customgreen]

This could very well be the begining of the end in the Obama administration. When you base your Presidency on change and listening to the people instead of the powerful you had better actualy do that. The AIG bonuses are a slap in the face of the American public. These are not struggling families that are barely making ends meet. These are people who did poorly at their jobs (overall) and should not be rewarded with a bonus. Forceful language has been used against the mistakes of the auto makers, but when it comes to Wall Street the administration is quiet untill all hell breaks loose.

[JohnFromCensornati]

"No one can blame the Obama Administration for apparently misreading the level of public rage toward AIG executives, who have collected millions in bonuses while racking up billions in taxpayer bailout money.'

I don't know about blame, but I definitely think they should have seen this coming. The fact that corruption was tolerated for the last decade isn't relevant. People are losing their jobs and homes *now*. If the administration is "out of touch" or "in a bubble", then they need to ask somebody outside the beltway.