04/19/2009 05:12 am ET Updated May 25, 2011

It's Gut-Check Time

I have been wrestling all day with what to write about this AIG mess.

On the one hand, as anyone who reads my stuff knows, I am a big supporter and admirer of President Obama, and was a part of Team Obama during the transition. I strongly support his bold progressive plans on healthcare, energy, education, and his budget. My strongest instinct is always to back his play, or to be quiet if I can't.

But as I wrote a couple of days ago, Obama has to make some clear choices on how he deals with the big banks and AIG. He is doing the right thing on just about everything else, but one issue can hurt a president badly, and the banks and AIG are at the absolute center of both our economic crisis and our politics right now. The Obama team is all over the map, with wildly mixed messages about how important the AIG bonuses are, and what the sequence of events was on who knew what when. I love and admire David Axelrod, but he is just plain wrong if he really believes that "people are not sitting around their kitchen tables thinking about AIG". Um, yes they are. And they are pissed out of their minds.

Look, this problem all goes back to the one thing, and if Obama gets it right, his troubles with AIG go away quickly. Right now, Obama is trying to walk on an incredibly narrow line with no safety net beneath: on the one hand, he is trying to re-assure Wall Street that he's not going to come down too hard on them, or force them to re-structure their operations too much. On the other, he's trying to respond to the populist anger that he understands and feels in his own gut.

I know you don't like us bloggers who over-simplify things, Mr. President, but this is gut-check time: you have to decide which side you are on. Many of my friends are calling for Tim Geithner's head, but I don't think that is what this is about. You as president need to decide which way you are going to go. One path keeps dribbling out more and more money to big bankers while letting them operate according to their version of "free market principles," such as giving multi-million dollar bonuses to retain employees. The other path says you save our banking system by taking it over, firing the executives who have put us in this mess, and putting people in charge with the public interest in mind rather than their own. The problem with trying to walk down both paths at once - giving out billions more to save the banks while letting them run things the way they are and at the same time expressing justifiable outrage when they screw up - is that it is politically untenable. It gets you in the AIG mess we have now, with Summers and Geithner saying we can't do anything about these bonuses and trying to justify their lack of attention to them, and other aides trying to defend them by saying this really doesn't matter much, while the nation keeps getting more and more pissed.

At some point, you are going to have to make a call, Mr. President: in spite of all the complications, you are going to have to be on one side or another. As one of your strongest and most loyal supporters, one who passionately wants you to succeed on your broad agenda, I hope you get it right. Because this is not a distraction, and it's not something people don't care about: it's at the core of whether your presidency succeeds.