Robert Reich explains why AIG may not be just Tim Geithner’s undoing, but the president’s:
AIG is rapidly becoming a nightmarish metaphor for the Obama Administration’s problems administering the bailout of Wall Street. One central problem is the lack of transparency. According to some news reports, Treasury Secretary Tim Geithner knew weeks ago that AIG was planning to issue the bonuses to executives in its notorious credit default swap unit, and felt it was contractually bound to do so. But even if Geithner discovered all this just last week, he faces an awkward question about why he didn’t know sooner. . .
The President cannot afford to lose the public’s confidence that his administration is a careful steward of the public’s money. The public was willing to go along with a large stimulus package. But it won’t go along with a second stimulus, and certainly not another TARP. And until the public feels confident that its money isn’t being thrown down a rat hole, it may balk at other ambitious undertakings such as health care or education or the environment.
So to review: this mess has undermined whatever faith Congress and most Americans still had in Geithner’s competency and credibility. The fact that the president vouched for Geithner magnifies the growing doubts about Obama’s own competency and judgment. The president’s defense of Geithner, in conjunction with Obama’s relative cluelessness regarding what was going on with the bonuses, undermines support for significant new administration initiatives that require a large degree of executive acumen.
And that may already be occurring. This poll tells us: “Fifty-five percent of the people questioned in a CNN/Opinion Research Corporation survey released Wednesday say that since he’s taken over in the White House, Obama has tried to handle more issues than he should have.”
The funny thing about credibility and competence: once the president loses the former and demonstrates a lack of the latter, it’s hard to regain the public’ trust. If nothing else, George W. Bush taught us that.