Thursday, March 19, 2009

obama, geithner, aig

Everybody is talking about this, so it's hard to add anything new. Let me content myself with a few points:

1. I am almost never sympathetic to the argument that "there's nothing we can do about it." Larry Cunningham had a fine piece in the Times yesterday about six or eight arguments that are commonly used to breach existing "contractual arrangements." As far as retroactive taxes go, these are rarely held unconstitutional; Larry Tribe had a post yesterday in which he suggested that other arguments (bill of attainder, etc.) would probably not fly if the provision were drafted sufficiently broadly. Publicity alone may force the return of some bonuses: there is evidence it already has.

2. The most interesting thing to me about the story is that the people at AIG would even have attempted to pay the bonuses in the current atmosphere. The only conclusion I can reach is that they genuinely felt they deserved them and did not see anything very unusual about it, which tells you a lot about the distance between Wall Street and the rest of the country. If they had been strategic, they would have set the money aside and paid it when things were calmer.

3. If people don't like the job Geithner is doing, they should consider expediting the approval process for Treasury positions and stop holding people up for not paying babysitter taxes, etc.

It pains me to say this, but I wonder if Obama wasn't smarter than I thought he was in pushing his budget package. Everybody and her brother is writing pieces to the effect that Obama is in over his head, that he needs to shelve his tax, health, and other proposals until he has dealt with the banking crisis. The problem is that none of them really has any idea how to do this, nor--except for a few moderate Republicans--much of an alternative to the Obama approach. The President, by contrast, has kept to a fairly simple story line: there is a short-term and a long-term economic crisis; it won't do any good to solve the short-term (banking) crisis unless the long-term crisis (economic inequality, declining infrastructure, dependence on foreign energy, and so forth) is dealt with also; I'm the only one who has a plan that addresses these issues. Whether any of this is really true--whether Obama's proposals would actually make any of these things better or even make them worse--may be less important than the perception of a crisis and the lack of obvious alternatives in dealing with it. Every time someone does something like the AIG executives, his suggestion of an existential crisis becomes that much more credible. How long before we start seeing articles about Obama's comeback, how he has learned on the job and wasn't so naive, to begin with?


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