Obama Economic Incompetence 2

New interlocutor Mac, commenting at SDP, has this in response to my recent post:

You can't really be serious by blaming this all on the President. After all, he inherited this huge mess from the past 8 years of economic incompetance. You gotta give some time. All Presidents have a rocky first two years and that just goes with the territory. Things will turn around eventually.

I certainly agree that Obama inherited a mess, though it’s not so easy to see that George Dubya was the root of all the trouble.  I don’t think, for example, that one can blame the financial collapse of Iceland on the Bush Administration, and Iceland is a microcosmic example of the now world-wide problem.  I also agree that things are likely to turn around.  When they do, Obama will get credit because he is in the White House.  That is how the system is supposed to work.

But President Obama has to take complete responsibility everything that Obama does or fails to do.  Sorry.  Friend and frequent interlocutor, A.I., has this:

"Treasury staff" was informed on 2/28 but TG says he didn't know until 3/10. Assuming honesty from TG and the Fed, we're getting into tin foil hat territory. Are there some treasury staffers pursuing their own agenda that aren't being totally open and honest with the administration? I pose this possibility because of the conflicting stories yesterday re. who changed Dodd's rule included in the stimulus package to limit the kind of bonuses AIG gave out and/or who killed the Wyden/Snowe measure. Reportedly treasury staffers involved in the stimulus conference committee had a hand in this but it seems the administration didn't direct their actions. One explanation for all these conflicting accounts is rogue treasury personnel. Of course the next question would involve less-than-forthcoming conference committee members.

A.I. and I have been conversing about the honesty of one Barack Obama.  A.I. has been parsing the issues like a Talmudic scholar, laboring to preserve the authority behind the text.  I am not a believer.  But neither am I all that offended by double talk.  I expect it from politicians, and I am entertained by it.  I just think it should be recognized.  Here, I think A.I. is right on. 

Over two days Dodd produced two stories about how a provision got into the AIG bailout bill that allowed the now infamous bonuses.  First he said that the language was added by someone else.  Then he admitted that he added it.  But he says that he did so at the urging of treasury officials.  Well, Dodd is a liar, no? 

Dodd’s story has now been confirmed by Treasury Secretary Geithner, from CNN:

Treasury Secretary Timothy Geithner told CNN Thursday his department asked Sen. Chris Dodd to include a loophole in the stimulus bill that allowed bailed-out insurance giant American International Group to keep its bonuses.

In an interview with CNN's Ali Velshi, Geithner said the Treasury Department was particularly concerned the government would face lawsuits if bonus contracts were breached.

Okay.  But Geithner has been saying that he didn’t know about the loopholes.  Obama himself said in California that he takes responsibility for the mess, but I gather he still says that he didn’t know about the loopholes.  From MSNBC:

President Barack Obama said Thursday evening [at the august public forum, the Jay Leno show] that he was “stunned” to hear about the $165 million in bonuses that were paid to employees of troubled insurer AIG over the weekend, promising to do everything he could to “get these bonuses back.”

I am guessing it went down like this: Treasury people decided that the bonus loophole was a good idea, either for practical reasons or because they were lobbied by some interest with leverage.  Or both.  They might have been right that it was a good idea.  If AIG is going to sort itself out, it needs to keep competent people, and these bonuses might be the way to do that.  Talent is expensive.  I think the scandal is largely hysteria. 

But I am guessing Geithner knew about this and that Obama knew about it.  If I am right, they are liars.  Either way they are evading responsibility.  Obama can say “I take responsibility,” but if he continues to say “I’m stunned about this loophole,” that ain’t taking responsibility. 

If I am wrong, and Obama and Geithner really didn’t know what was going on, then the Administration is clueless on a rather important matter.  That was my original point. 

Comments

[A.I.]

I would contend this was less a case of "economic incompetence" than of "political incontinence". As you say, the sum involved was small in the overall scheme of things--less than 1/10th of one percent of AIG bailout funds and a far more miniscule portion of total bailout/recovery spending. But the political fallout should have been anticipated and someone was clueless in that regard.

Dodd was obviously clueless. Beyond that, we're in the realm of supposition. My guess is Geithner who is more "bean counter" than politician was clueless. Balancing a payout of 165 bonus beans against a risk of hundreds or thousand of lawsuit beans would be a no-brainer and, arguably, the economically "competent" thing to do. But would he think of the political implications?

Considering others involved, my guess is Obama didn't know. That is re-enforced by one other factor. I can't imagine someone as politically astute he would have let this manifest the way it did had he had advance knowledge.

As an aside, there is one mostly forgotten sub-group of all who've been harmed by AIG's Financial Products division--that being all the other divisions of AIG. They, by all reports I've seen, were clean, profitable operations. Many of their employees probably deserve bonuses that were included in what was to be a billion dollar payout. But thanks to their corrupt cousins in the FP division they may not get bonuses and may not even have a company to work for as things evolve.

And those guys in FP you say need retention bonuses, a few rhetoricals: If they're so talented, why did they take their company--and the world economy--to the brink of destruction? And if they don't get bonuses, who else is going to hire them if they quit? In fact, who in the business they're trained for can afford to hire them or would want to?

[Mac]

I was actually impressed that the President has taken responsibility for some of the initial mistakes his Administration has made. I have not heard the words, " I screwed up," from a sitting President in my lifetime. The only other President I can think of that comes close is Harry Truman who always said the "buck stopped" with him. The President takes responsiblity head on and does not use his Treasury Secretary as a scapegoat like the previous Administration did with Secretary O'Neil. That is an admirable quality and shows leadership. He's also willing to confront the issue and learn from it. These are qualities of true leadership in my opinion, at least. We have to give it sometime anyway because our huge economic dilemma will not be fixed over night and I think the President is taking some of right steps in addressing this, however, we are responsible in doing our part to live more with in our means and that is the big lesson from this economic collapse.

[KB]

AI: thanks again for the comments. Between the two of us, I think we provide a useful and entertaining product for readers of this blog. The same goes for Mac. It seems odd to me that you prefer to put this down to political rather than economic incompetence, and then infer Obama's innocence from his shrewdness. Can he really be shrewd and politically incompetent? And if the latter was on the part of certain treasury officials, well, who was in charge? Anyone? It seems pretty clear that the Administration knew about all the tax problems of its nominees, and didn't think they were important. So much for shrewdness.

Dodd wasn't clueless, he was a liar. And an incompetent one, saying one day that he didn't know about X, and the next day, that he did X because the Administration told him to. He certainly thought, when he inserted the bonus exemption, that Obama was behind it. If "rogue treasury officials" are behind all this, as you have suggested, has anyone been fired? That would be "taking responsibility", firing the rogue agents. I don't believe in rogue agents.

Mac: it's all well and good to say: "I screwed up," and "I'm responsible." But when you keep saying that "I didn't know about it!" that somewhat blunts the effect, no? This is a pattern with the President. Back when the Jeremiah Wright story erupted during the campaign, Obama claimed he didn't know about Wright's radical views. Was he asleep for the twenty years of sermons that the good reverend gave?

Whether planning for a trillion dollar deficit each year for the next ten is "taking the right in addressing" the economic problems, I don't know. But on this topic, either Obama knew what his own treasury department was doing and what was in the bill he signed, or not. If the former, he is lying about it. If the latter, he is clueless. I hope its the former.

[Mac]

Ken, like I said before, it will take sometime to iron out these wrinkles. The economic mess was decades in the making since we went on our spending splurge and used credit cards for most purchases, then, you take into account the excessive greed all around. You just got to be patient because it's going to be a rough couple of years, no doubt. However, this President will weather it well and we'll get back on our feet as a nation. You just got to leave it to the pros, they got alot of information we don't and they know what their doing.

[shygrl]

We all know now that many members of the Federal Reserve, the U.S. Treasury, members of the U.S. Congress, and the White House absolutely knew about the AIG bonus payments sent out last Sunday. And that Senator Chris Dodd (D-CT) added the language to the stimulus bill passed last month at the request of both the White House and the U.S. Treasury!!!

Even bigger questions are as follows:
1. Why is our "stimulus" and Bail Out money being paid to banks and organizations OUTSIDE THE U.S.? (So far, I've tracked over $130 billion that has gone to other nations and I'm sure there has been a lot more!)
2. Why is AIG paying full dollar for dollar on these bad derivitives? Obviously, the loss by "investors" is not as much as this and should be reviewed as to whether these payments constitute conspiracy and outright fraud!
3. Why was "retention" bonus money paid to former AIG employees who had already left the company?
4. Who are the "hedge" funds buried secretly in these bank beneficiaries that have benefitted with U.S. taxpayer bail-out money? (AIG doesn't know but the benefitting banks do!)
5. Why are these individuals currently not required to "SHARE THE PAIN" our congress and president say we ALL MUST DO, especially since many of these individuals are directly responsible for the financial meltdown of this nation as well as many others who played follow-the-leader around the globe? (This makes individuals who are employed by U.S. bail out companies "Un-American" if we each listen to words spewed to us through countless interviews and speeches by our current president and other goverment officials.)

Americans have and are loosing their jobs, having unemployment insurance payments run out, lost or are loosing their homes, lost or are loosing their health insurance, using retirement savings to keep themselves and their families going and in some cases loosing their entire net worth accumulated over 20, 30, 40, and even 50 years of hard work! The longer this goes on, the more families will suffer these impacts. But, most of all, Americans are loosing faith in our banks, insurance companies, pension fund administrators, federal and state government leaders, bank regulators, financial product rating agencies, the FDIC, and others. Meanwhile, we have a war going on below our Mexican border which has the potential to overthrow the Mexican government and really pose serious risk to us as well! According to a very recent congressional hearing, even our border patrol is operating a gambling pool predicting when the first RPG will be fired within U.S. borders as part of this violence!

How much more scandal can the American people stand before serious revolt occurs? I don't think much more!