Obama Agenda Derailed by AIG!

A front page story in today’s WaPo by Michael Shear and Paul Kane, “Anger Over Firm Depletes Obama’s Political Capital,” proclaims, “President Obama’s apparent inability to block executive bonuses at insurance giant AIG has dealt a sharp blow to his young administration and is threatening to derail both public and congressional support for his ambitious political agenda.”

Considering that I oppose large chunks of said agenda, that would be just fine by me.   Unfortunately, Shear and Kane adduce approximately zero evidence for their claim.

Basically, quite a few prominent Democrats and even more Republicans are PO’d at AIG handing out bonuses and some are saying Obama should have done something to stop it.  This fact is apparently “hounding Obama as he pursues his larger goals, in part because of the president’s own repeated declarations of outrage — offered again yesterday — aimed especially at the firms that are feeding at the public trough.”

Distractions happen in politics.  What’s the evidence that this is going to, as they say in the biz, “have legs”?  More to the point, what’s the evidence that it’s going to derail Obama’s agenda for more than a couple of days?

Obama remains personally popular and averages 60.9 percent in job approval. (This compares, incidentally, to 37.0 percent for Congress.)  His party has strong majorities in both Houses of Congress.   The Democratic leadership in both Houses of Congress largely supports his governing agenda.   What’s the evidence that they’re going to derail it to spite him over AIG’s paying out bonuses that he didn’t authorize.

Again, I hope Shear and Kane are prescient.  But I’d like to see just a wee bit more evidence before I start dancing for joy.

Photo from Reuters Pictures

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James Joyner
About James Joyner
James Joyner is Professor and Department Head of Security Studies at Marine Corps University's Command and Staff College and a nonresident senior fellow at the Scowcroft Center for Strategy and Security at the Atlantic Council. He's a former Army officer and Desert Storm vet. Views expressed here are his own. Follow James on Twitter @DrJJoyner.

Comments

  1. odograph says:

    It’s kind of weird too that people are on the same side as Obama in this, and frustrated with him for what seem real legal constraints.

    (If Bernanke/Paulson had let AIG hit bankruptcy before guaranteeing its debt, we wouldn’t be here. Do people think AIG should be thrown to BK now? Can it?)

  2. I am not so sure that the long-term effects won’t be enhancement of the federal government’s position vis-a-vis bailout policy (or whatever one wants to call it), as all this seems to be doing at the moment is increasing public anger at the financial sector, not the Obama administration, if if they want the admin to “do something.”

  3. PD Shaw says:

    Obama should give a speech, drawing on his experience as a Constitutional Law lecturer and point out that we are a nation of laws. That no matter how difficult the situation and how great our sense of anger and despair, the law will be maintained. That he, like Lincoln, sees the rule of law as fundamental of a part of the infrastructure of our land, as are roads and bridges. And he intends to build and restore that infrastructure, not tear it down for momentary gain.

    The AIG bonuses are deferred wages. To not pay the wages earned, not only violates basic tenants of our Constitution, but sends the wrong message to employers everywhere in this difficult time.

  4. Bithead says:

    It’s not weird at all, Odo, when you consdier the method of operation for Obama and company.

    This is them trying to control the narrative. In this case, the narrative is private industry, private concerns are the evil ones, and the government is just there to help.

    Forget, for the moment, of course that what we have is a situation where government, in the ahnds of the Demorats went where it should never have gone, and screwed up that process. They made a law with no legal provision to stop AIG from conducting business as usual, and are now about casting AIG as the vilian.

    Here it is; AIG was acting like a business. That’s what they’re supposed to do. They followed their contractual obligations, with the help of a poorly written federal law. Government, as run by Democrats, went way outside their constitutional limits and tried to alter the natural path of business. Who of the two went outside therir purview?

    All this screaming about AIG is the Democrats trying to keep a smoke screen over those facts. If anyone notices that government was overstepping it’s bounds, the narrative is lost.

    And the narrative is all. Global warming, the same way. Mere facts cannot be allowed to defeat the narrative. I suggest looking in recent threads on this blog for more on this.

    Same goes for racism. I suggest a read of an article posted yesterday on National Review for a prime example of that.

    Steven Taylor’s correct when he suggests that the anger over AIG is strengthening the government;s position. That’s EXACTLY why the government is so busy fanning the flames,and reinforcing the ‘capitalism is evil’ narrative on this one.

    The outcome of that is clear to me, even from this vantage point.

  5. PD Shaw says:

    Basically, quite a few prominent Democrats and even more Republicans are PO’d at AIG handing out bonuses and some are saying Obama should have done something to stop it.

    I’ve yet to see what Obama could have done, unless doing something meant not bail out AIG. In that case, AIG would have still paid the bonuses.

    The problem is that AIG believes, and the Dept. of Treasury apparently agreed, that these are earned wages. Even forcing AIG into bankruptcy, these wages would receive priority in payment. Not paying them, gives the employees an opportunity to double the bonuses and get their attorney fees reimbursed under Connecticut law.

  6. WR says:

    Funny how millions in bonuses to a handful of millionaires who helped bankrupt the world are deferred compensation and therefore a sacred obligation, while pension and health plans of current and retired auto workers are nothing more than greedy grasping by evil unions and must be wiped out before car companies can get a dime.

  7. PD Shaw says:

    The difference is between future benefits and earned wages.

  8. odograph says:

    It’s not weird at all, Odo, when you consdier the method of operation for Obama and company.

    This is them trying to control the narrative. In this case, the narrative is private industry, private concerns are the evil ones, and the government is just there to help.

    Someone (“Mr. Market?”) sure gift-wrapped a narrative for them, didn’t they?

    Here it is; AIG was acting like a business. That’s what they’re supposed to do. They followed their contractual obligations, with the help of a poorly written federal law.

    Do you understand that what they did was write too many one-sided instruments? It was like a bookie taking a fat book of bets on the Super Bowl, but only for one outcome, and without enough money to pay the loss if it went that way.

    This is a key question in the narrative, about the nature of our markets, regulation, and safety nets going forward.

    Is it OK, just “business” for a firm to take enough one-sided bets to take down the world’s largest banks?

    (I won’t address the rest of your post, because I think it falsely rests on the idea that AIG was just doing what they should have done, and no one should have stopped them.)

  9. odograph says:

    PD, I think retirement benefits actually equal deferred compensation. Perhaps not legally, but morally.

  10. The one enjoyable part of politicians who get themselves elected by fomenting populist outrage is the inevitable Shadenfreude when their mob suddenly turns on them.

  11. PD Shaw says:

    odograph, I would agree if the pension benefits have vested (the employee has worked the requisite number of years), it isn’t much different from deferred compensation. But the people who wanted to reopen the union contracts were mainly interested in the freedom to change work rules and modify compensation going forward.

    The AIG bailout has a similar provision preventing payment of bonuses for contracts going forward (after Feb. 11. 2009).

  12. Bithead says:

    Someone (“Mr. Market?”) sure gift-wrapped a narrative for them, didn’t they?

    Shouldn’t have been all that hard to predct business acting like (gasp)business!

    Do you understand that what they did was write too many one-sided instruments? It was like a bookie taking a fat book of bets on the Super Bowl, but only for one outcome, and without enough money to pay the loss if it went that way.

    This is a key question in the narrative, about the nature of our markets, regulation, and safety nets going forward.

    Do you really understand WHY?

  13. odograph says:

    Do you really understand WHY?

    The choices seem to be:

    a) they were dumb and thought they’d make money forever

    and

    b) they were smart, and thought it would ultimately fail, but they’d still have their bonuses.

  14. Bithead says:

    So, the sales people are responsible for this, or the managers? You’re talking about penalizing the sales people who afte rall, did the job they were asked to do, on the understanding they’d be bonused for it.

    That aside, do we really want this level of governmental involvement after the fact?

  15. odograph says:

    I thought you were a capitalist, Bit. Did you just say “penalizing?” We have a company here that would be dead and gone, bankrupt, without a government bailout. The market would have given everyone in the chain from sales to CEO nothing. It would have been up to a bankruptcy judge to dole out the slender remaining assets. Most would have gone to creditors.

    Now what, are you a socialist? Is that the next step, government ownership and bonuses for everyone ran that ship onto the rocks?

  16. odograph says:

    I GET IT!

    Bit is a “new Republican.” He thinks government involvement can only be “free money” because anything else distorts the market.

  17. Bithead says:

    I thought you were a capitalist, Bit. Did you just say “penalizing?”

    What else wuld you call what Schumer’s insisting on, then?

    We have a company here that would be dead and gone, bankrupt, without a government bailout.

    You ignore that absent governmental manipulation of the housing market, none of this would have ever happened.

  18. odograph says:

    You ignore that absent governmental manipulation of the housing market, none of this would have ever happened.

    Epic fail – and this is probably a critical failure on the far right. That fringe loves markets, as many of us do, but cannot talk honestly about bubbles, manias.

    (I do note that you successfully tide one delusion to the next, to the next, to the next, until you completely the loop.)

  19. Bithead says:

    Epic fail – and this is probably a critical failure on the far right. That fringe loves markets, as many of us do, but cannot talk honestly about bubbles, manias.

    No sale. The whole thing is directly tied to Democrats trying to buy votes with housing… and do try to approach that one honestly.

  20. odograph says:

    Show me your data, Bit. I can show you a whole book on the other view, that stocks and houses experienced a classic market bubble (Shiller’s Irrational Exuberance, mentioned earlier).

    One of the strongest proofs in that book was that the housing bubble was actually international. When houses bubbled in Spain and Australia and in the US, it’s kind of hard for a reasonable person to think it was tied to a US party.

    Shiller’s observation was that houses spiked in “jet set cities” — cities with an international airport. That was a better correlation than being in the same country. Los Angeles prices had more in common with Vancouver than with rural Kansas.

  21. anjin-san says:

    The whole thing is directly tied to Democrats trying to buy votes with housing

    As early as February 2002, Bush said at a conference on retirement savings, “I want America to be an ownership society, a society where a life of work becomes a retirement of independence.” Even as Texas governor, he told senior citizens: “Ownership in our society should not be an exclusive club. … Everyone should be a part owner in the American dream.”

    In his Jan. 20 inaugural address, Bush offered a grand vision of newly empowered Americans: “To give every American a stake in the promise and future of our country, we will bring the highest standards to our schools, and build an ownership society.

    “We’re creating…an ownership society in this country, where more Americans than ever will be able to open up their door where they live and say, welcome to my house, welcome to my piece of property,” Bush said in October 2004.

    It was Margaret Thatcher who pioneered a solution. The effort centered on Britain’s public housing, or council estates, which were filled with die-hard Labour Party supporters. In a bold move, Thatcher offered strong incentives to residents to buy their council estate flats at reduced rates (much as Bush did decades later by promoting subprime mortgages).

    Clearly, it was all the fault of those darned Democrats…

  22. odograph says:

    FWIW anjin, that’s the reason I don’t let Bush off the hook. Those things you mention were gasoline on the flames. It would have been a fire anyway, but …

  23. Bithead says:

    FWIW anjin, that’s the reason I don’t let Bush off the hook. Those things you mention were gasoline on the flames. It would have been a fire anyway, but …

    Well, exactly my point. Look closely, and you’ll notice I’ve never defended Bush on this point. As I keep saying… and nobody notices… Bush, like his father, is at best a centrist… he’s no conservative. THere’s a major difference, however, between the exact proposals of Bush to the matter, and what was placed into motion by the Clinton administration, in terms of altering CRA.

  24. anjin-san says:

    There is no doubt that both parties and a lot of folks in the financial industry all contributed to this train wreck.

    The whole thing is directly tied to Democrats trying to buy votes with housing

    Bit, how do you define “The whole thing”. To most of us it means, you know, The whole thing. You make a blatantly partisan attempt to blame everything on Democrats, then when your rather lame position is shredded, your response is “well, exactly my point”. Please…

  25. Bithead says:

    Anjin, you keep on claiming I’m always defending Republicans. Thing is, when I point out I’m not your argument loses a lot of it;s force.

    As in this case.

    “the whole thing’ is the economic failure under discussion. Were you hoping I’d changed the subject?

  26. anjin-san says:

    Anjin, you keep on claiming I’m always defending Republicans.

    Really? Please show where I have ever said that. Even one example will do. There is nothing wrong with defending one’s party as long as one is also able to discuss it’s shortcomings.

    If you presented a few balanced arguments, people would take you seriously. Your need to blame all on Democrats borders on pathology, and your weak attempts to walk things back when you are called on your BS do not impress. Saying that “you never defended Bush” is hardly the same as holding him accountable for his part in the problem.

    You seem to think I am a hopelessly partisan ideologue. Here, watch this.

    Anjin-San says that both Democrats & Republicans are to blame for the financial mess. Leaders of both parties have served us very poorly. The private sector also played its part, as did millions of private citizens.

    See? it’s not that hard.