How has a popular Democratic president with a convincing electoral mandate failed to translate the opportunities of recent events into the "change" for which voters clamored? What kind of miscalculation allowed his administration to stir up such a wave of populist fury in such a short time?
The short answer, of course, is AIG. Why did the Treasury Department allow the payout of many millions in bonuses to executives of the unit that sank the company? Every answer the president's brain trust offered made them look more feckless, at the very moment they were rolling out a bank plan designed to spare stakeholders of our troubled financial institutions the haircut they so richly deserve.
This lapse of common sense arises from a deeper problem: the reflexive contempt for populism that is felt by the dominant faction of the Democratic Party -- the faction that regards itself as the responsible guardian of financial civilization, and that thinks of populism as crackpot economics and senseless proletarian rage.
I was reminded of the party's long-simmering debate over populism a little while ago when I read an essay by Al From, the founder of the centrist Democratic Leadership Council (DLC), announcing his retirement as that group's "CEO" and recounting his many successes over the years in building a "political brand." A short while later I read in Roll Call an account of Mr. From's career as "one of the 20th century's most successful political entrepreneurs," a man whose adventures in shifting the Democratic Party to the right formed a neat analogy to Mr. From's father's accomplishments in the suburban garage-building biz.
In Washington, where the need to treat government like a business is a no-brainer, thinking about politics in this way -- as though it were a matter of branding, entrepreneurship and CEOs -- is thought to be highly advanced stuff.
But I don't agree. Surely we have learned the hazards of turning business models loose on the state, after all our experiences with the "MBA president" and his "market-based" government, all the "K Street Projects" and "superlobbyists" of the last 20 years, all the regulatory agencies that understood the regulated as their "customers," all the bailouts engineered by friends of the bailed-out, all the faith placed in "voluntary compliance" on the grounds that business would naturally self-regulate.
Still, none can doubt the DLC's success at pushing "third way" humbug in elite Democratic circles. Many of the rhetorical gestures we associate with centrism -- for example, the habit of dismissing liberal policies as "industrial age" relics -- got their start in Mr. From's shop.
The theme that matters most these days, though, is the DLC's war with populism, a term that is supposed to summarize everything that is wrong with class-based discontent. Not only is populism mulishly wrong-headed, according to the DLC, but it is a sure-fire electoral loser -- a whiff of populism, the group once concluded, is what cost Al Gore the 2000 election.
The group's attacks on populism resonate in D.C., I suspect, because the commentariat has always thought "populism" to be faintly ridiculous, a thing of mobs and pitchforks and windbag leaders more demagogue than CEO. (For an illustration of what I mean, look at the cover of the latest issue of Newsweek.)
This way of thinking has not served the Obama administration well in recent weeks. Think of Larry Summers repeating, on program after program, his outrage with the AIG bonuses, but then immediately moving, as you would with a naughty child, into a discussion of the rule of law -- which I guess is what you call the years of de facto de-supervision that allowed this disaster.
One of these days it may dawn on our leaders that the public, in this case, is right; that this time the mountebanks and charlatans are not the populists but the responsible-looking CEOs who ran the country's financial institutions into the ground -- and who the administration apparently wants to leave in charge of many of those institutions. The public outrage about performance bonuses isn't just mindless resentment; it is directed at exactly the instruments that steered the economy into the ditch and the executives who built the system -- and who will demand to do business the old way as long as they have breath to bellow.
What's more, it is only thanks to populist members of Congress that we know our bailout of AIG sluiced billions to foreign banks, and it's only thanks to public outrage that the administration feels any pressure at all to exert a firmer hand on the institutions it has rescued from bankruptcy.
There are many, I am sure, who wish that this whole bailout business could be settled as an affair between political entrepreneurs and the interests that fund them, as in days of yore. But I hope President Obama has a better strategy than that planned for the time when his Treasury Department has to ask Congress for another helping of TARP.
Thomas Frank's column, The Tilting Yard, appears every Wednesday at OpinionJournal.com
Also in Opinion Journal:
Timothy Geithner: My Plan for Bad Bank Assets
Fred Krupp: Carbon Caps Are the Best Policy
http://eye-on-washington.blogspot.com
The only complexity is how the Banks are linked together!
We could isolate them like the cancer they are and build a Strong Credit Flow directly to the 99.9% of America outside the 8 Wall Street Banks and AIG!
With a little work and funding, like a Bypass Surgeon does everyday, we can go around Wall Street!
We have Credit Unions, Community Banks, and the Government can lend directly to consumers and businesses at much better rates if the funding was flowing to these sources.
Wall Street is not the "HEART OR BRAIN" of this Country and should be BYPASSED until its cleaned OUT and regulated!
$1 to Main Street does not equal $1,000 to Wall Street!
Fund Credit Unions, Community Banks, and OPEN up Credit FLOW from the Government to Consumers and Business on Main Street, the 99.9% of America that matters!
Print a Credit Currency against the Government's guarantee to reduce DEBTS instead of the Current FED Debt Currency!
The current thinking is a variation of the old adage, "As goes General Motors, so goes America." That's been dead for some time now. The new variation is, "As goes Wall Street, so goes America."
President Obama was elected on a promise to bring change, and he has appointed the very people who caused this meltdown to fix it.
You wonder why people are mad and feel betrayed? Yes, I voted for the president, and I am very disappointed with developments so far.
Sure there's a lot of lip service going on ... and a lot of Obama watching ... but there's actual legislation that congress could be enacting.
They need to stop watching Obama and get to work.
Maybe because those retention bonuses went to people in a different part of the unit (Financial Products) that sank the company, a part that has been bringing gains, not losses, into AIG? Maybe because those people stayed around to help bail a sinking ship so that it *could* repay the government loans?
I tell you what. There's no way AIG could have functioned without the secretaries and janitors, so obviously they're guilty of having enabled AIG, and they must have heard *some* office gossip, which they didn't run to the press with about the financial products division's subdivision that was dealing with credit default swaps. Let's fire all of those people and take back everything they made last year.
Populist anger is pitchfork wielding nuts,
Toxic assets are Home loans unemployed because of derivatives sucking all the investment out of Main Street.
AIG AIU's credit default swap INSURANCE WITHOUT RESERVE scam is under reported as the true cause of this crash.
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2010 and 2012 are just around the corner. We can sweep these traitor-Democrats out to sea in the coming elections.
signed
BHO
Is it just me or does anybody else see how difficult this new transparency is to maintain?
Two months of the President trying to keep us as informed as he legally can just leads to more arm chair quaterbacking.
Personally, If I wereThe President, I'd just keep working and stop talking for a while.
You don't think taxpayers have a right to complain when they being ripped off?
I am getting really tired of brain dead zombies who support Obama no matter what he does. Some people seem to think that ignorance is virtue. If you know anything about the history of political movements you know that working people's interests are only looked after when the working class forces the politicians to listen to them by being politically active. I'd rather be an armchair quarterback than an armchair coach potato who wonders why nothing ever changes.
Great post!
A vision with a plan is a strategy.
I will trust in Obama's strategy, thank you very much.
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