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Faux Outrage

The president is trying to get out in front of the populist mob before it tramples him. But his effort to mirror their shock and indignation is not convincing. The DC Examiner observes:

Let’s review the facts: Geithner, as New York Federal Reserve Board head under Bush, was the chief architect of Toxic Asset Relief Program (TARP) bailout, which funded the bonuses that now have taxpayers seeing red. It was Obama who put Geithner at Treasury despite the latter’s failure to pay federal taxes four consecutive years. And it was Obama who promised that Geithner would present a detailed plan for completing the TARP clean-up he started during the Bush administration. So it is hypocritical in the extreme for Obama and Geithner to now pose as if they didn’t know AIG was going to be using TARP funds to pay the bonuses. Just two weeks ago, White House press secretary Robert Gibbs said Obama and Geithner were “confident” they knew how TARP money was being spent.

After saying they would try to block the bonuses, administration officials then said they would instead apply more stringent rules to the next $30 billion round of bailout funding. But if the White House has the power to call the shots on how bailout money is spent “next time,” it also had the power to do so in the first place.

And in with his not-very convincing performance Obama is now compelled to do something quite unseemly. He has become the Bully-in Chief. As the Washington Post editors remark:

Under the circumstances, we can understand why President Obama feels that he must join this opportunistic chorus rather than resist it. Still, this has not been a stellar moment for the man who came into office arguing that “the time has come to set aside childish things.”

It is one thing for the government to have prospectively “encouraged” AIG and its employees to work this out — to forgo or delay bonuses until, for example, the company is profitable. It is quite another to have special tax laws aimed at a specific group of people, send the New York York attorney general after them, and shift the blame to bonus recipients from the hapless Treasury Secretary who wasn’t clever enough to pursue a voluntary arrangement. Even some Democrats are troubled:

House  Majority Leader Steny H. Hoyer (Md.) told reporters that he worried about running afoul of the Constitution’s equal-protection clause, which forbids laws that treat certain groups differently. For now, Hoyer advocated a course of action that centered on a campaign of public pressure to persuade the AIG executives to surrender the bonuses.

House Ways and Means Committee Chairman  Charles B. Rangel (N.Y.) also raised doubts about the tax idea. “It’s difficult for me to think of the code as a political weapon,” he told reporters outside his office. “Is this an indictment or a bill?”

This sort of passive-aggressive approach to governance only underlines how disastrous the White House’s performance has been. And this all stems, of course, from the Bush-Obama bailout mentality that seeks not just to take toxic assets off the books to open the flow of credit, but to take over and manage huge, complex financial firms. As I ( and others) have argued, the real solution is Chapter 11, where expert referees can unwind employment agreements and if needed liquidate the company. Instead, we have the Obama team running AIG like an absentee landlord. It has proven to be spectacularly inept at it and should get out of the business of (mis)managing businesses.


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