Obama’s Financial Incompetence 1

Regarding the Obama Administration’s economic policy, there are two possibilities.  One is that they have some kind of secret strategy for turning the United States into France.  One almost has to hope that that is true.  At least then we get coherent policy in the short run, even if the coherence is concealed from nearly everybody, and a policy to contend with in the not so short run. 

The other possibility is that they have no flippin’ idea what they are doing.  So far, that’s where the evidence points.  The current hysteria over AIG paying large bonuses to its employees is exhibit A.  Instead of closing down this money pit, first Bush and then Obama chose to try to fill the pit with money.  Now we are shocked, shocked, that they are spending the money the way financial corporations do.  Lawrence Kudlow does a great job of describing the situation. 

AIG should have been placed in bankruptcy last fall under some sort of government sponsorship. While in bankruptcy, all the salary contracts (and every other AIG contract) would have been nullified and voided. At the same time, there would have been an orderly liquidation and sale of AIG's assets and separate divisions.

But as things stand now, there still is no clear roadmap for the dissolution of AIG. There are ideas, but nothing is set in concrete.

And as for the $165 million or so in AIG bonus payments, the Obama administration -- including the president, Treasury man Tim Geithner, and economic adviser Larry Summers -- knew all about them many months ago. They were undoubtedly informed of this during the White House transition.

That’s the real AIG outrage.  Not that a lot of high priced accountants are getting big bucks, but that having spent so much money in several bailouts of AIG, we are no nearer resolving the problem.  Ditto with the U.S. Auto industry. 

Maybe there is some secret agenda behind all of this.  I understand the argument that Obama wants to use the current economic peril to justify an enormous expansion in government.  Okay.  But how does keeping a zombie corporation lurching and moaning advance that agenda?  All the clues of cluelessness are here. 

Comments

[A.I.]

As I read them, the contentions in your post rest mainly on this assertion from Kudlow: "And as for the $165 million or so in AIG bonus payments, the Obama administration -- including the president, Treasury man Tim Geithner, and economic adviser Larry Summers -- knew all about them many months ago. They were undoubtedly informed of this during the White House transition."

The administration denies they had any such knowledge before last Thursday. So it would seem, either Kudlow is wrong or the Obama folks are lying or their is some other explanation I'm not imagining. I do note Kudlow uses the words "were undoubtedly informed" rather than citing any concrete evidence they were.

You're previous post's on Obama's honesty--or lack there of--indicate you consider him a liar or at least want to characterize him as such. I'll go with "innocent until proven guilty" and Kudlow claims don't rise to proof of guilt.

As to resolving the AIG problem, nothing in your post makes the case that no progress has been made. Fact is, there are many AIG problems. The most important is the negative impact the company has had on the economy which is a problem many believe is being resolved. Another problem is the company's sense of entitlement equaling unconscionable greed--which I'll agree has not been resolved. However, new regulatory measures are being developed and stronger regulation is about the only recourse available for governments to channel corporate greed in a positive direction. Too bad that wasn't realized sooner--say in the oh so competent previous administration.

[KB]

I think the question here is one of competence, not honesty. But since you mention it, there is this story:

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"Although Treasury Secretary Timothy Geithner told congressional leaders on Tuesday that he learned of AIG's impending $160 million bonus payments to members of its troubled financial-products unit on March 10, sources tell TIME that the New York Federal Reserve informed Treasury staff that the payments were imminent on Feb. 28. That is 10 days before Treasury staffers say they first learned "full details" of the bonus plan, and three days before the Administration launched a new $30 billion infusion of cash for AIG."

As for the Administrations current efforts, I am sure the company's negative effects on the economy are "being resolved." I am just not certain that they will ever "be resolved" at the rate things are going.

[A.I.]

"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.

[Mac]

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.

[Gilbert]

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