By Chua Chin Hon
WASHINGTON: Since assuming office in January, President Barack Obama has portrayed Wall Street as but one among the many systemic ailments plaguing the US economy, rather than a cancerous growth requiring urgent operation.
An effective cure for America’s problems, he and his economic team believe, will not come solely from rectifying the problems of the financial sector. Rather, they believe the economy will get back on its feet when longstanding economic problems involving health care, energy and education are addressed at the same time as the credit crunch.
Even a raging controversy over the multi-million bonuses paid by floundering insurance giant AIG, the worst scandal to hit Mr Obama’s fledgling presidency, could not shake his prognosis of the problem.
With his jacket off and sleeves rolled up, a combative Mr Obama told a town hall meeting in Costa Mesa, California, yesterday: ‘Now, there are those who say these plans are too ambitious; we should be trying to do less, not more. Just focus on Wall Street, focus on the banks.
‘Well, I say our challenges are too large to ignore. The cost of health care is too high to ignore. The dependence on oil is too dangerous to ignore. Our education deficit is too wide to ignore.’
All true. But the world has already seen what happens when a US President becomes too fixated on his vision and grand plans at the expense of realities on the ground.
If there are warning signs that Wall Street deserves his undivided attention, then they don’t come any bigger than the roiling AIG debacle. The insurance giant had doled out US$168 million (S$255 million) in bonuses to the very executives in the very unit that had brought the company to its knees.
The escalating public and political outrage could yet claim the scalp of Treasury Secretary Timothy Geithner. Congressional support for future financial rescue plans has also weakened considerably. The already difficult task of reviving the economy has just become much, much more complicated for Mr Obama.
No one is suggesting that he should pay attention to the daily fluctuations of the stock markets. But there are at least two good reasons why he needs to pay full attention to Wall Street: One, the financial bailouts the government has announced thus far are far more complicated than anyone had imagined; and two, his overworked and overwhelmed economic team is behind the curve.
Fresh insider details from a flurry of media reports yesterday painted a picture of poor communication between the Federal Reserve, the Treasury and the White House.
The Washington Post, quoting an unnamed government source, said the Fed knew about the AIG bonuses at least three months ago but ‘clearly underestimated’ how politically explosive the matter was.
Mr Geithner told the newspaper that he was ‘stunned’ when he found out about the problem on March 10, but did not explain why he, as a central figure involved with the government’s rescue of AIG since last September, did not know about it earlier.
The 47-year-old Treasury Secretary is still lacking 17 deputies, all requiring Senate confirmation, who should be assisting him in the department. Though he and his senior staff scrambled to find a solution to the AIG bonus problem, they concluded that there was nothing they could do about it.
Mr Obama was informed only two days later, on the eve of the day when the bonuses were to be paid. When he and his top economic aides met on Sunday, the President overruled his team and told them to seek all legal ways to recover the bonuses.
It was only on Tuesday night, after three days of public rage against AIG, that Mr Geithner began sending a flurry of letters to lawmakers explaining his efforts to recover as much of the bonus money as possible. According to the Associated Press, he brought in Attorney-General Eric Holder only at that point.
These accounts, if true, illustrate the economic team’s lack of political astuteness.
As Mr Robert Reich, who served as labour secretary in the Clinton administration, wrote in his blog: ‘The President cannot afford to lose the public’s confidence that his administration is a careful steward of the public’s money.’
To his credit, Mr Obama took full responsibility and said: ‘I know Washington is all in a tizzy and everybody is pointing fingers at each other. Listen, I’ll take responsibility; I’m the President.’
Refreshingly candid words, but it might be more productive for him to take a step back, look at the quandary his team is in, and say that it’s time he got more personally involved in fixing the mess on Wall Street.
Instead, he told the crowd in Costa Mesa: ‘We’ve got to solve this banking crisis. There’s no doubt about it. But you know, when you’re President, you’ve got to walk and chew gum at the same time.’
In good times, such flippant remarks may be laughed off as the brash talk of an ambitious leader. But in these turbulent times, they make Mr Obama sound a tad out of touch.