In the middle of decrying the misdeeds of the financial firm AIG, President Barack Obama cracked a joke. "Excuse me," he said Monday, after coughing into the microphone. "I am choked up with anger here." There were laughs all around the gilded East Room of the White House because he didn't sound angry at all.
The laughter, of course, did not fit the occasion, the latest in a seemingly endless stream of public events at which Washington's political leaders work themselves into high dudgeon over the sins of financial wizards who, we are told over and over again, have messed up the world for everyone else. But then, you can act outraged about the same thing only so many times before it all starts to sound stale. These spectacles, the public rhetorical floggings, have become teleplays, as predictable as a daytime soap opera, as comforting as a wet rock. (See pictures of the top 10 scared traders.)
As the event wore on, even Obama did not seem that into it, a surprising misfire for a politician who has long excelled at striking the right tone at public appearances. He was almost grinning as he described the "recklessness and greed" of the traders in AIG's financial-products division, a reckless band of wealthy incompetents who made bets they could not pay for, leaving the American taxpayer on the hook for as much as $173 billion in emergency funds an enormous sum that works out to about $600 for every man, woman and child in America. "How do they justify this outrage?" Obama asked rhetorically, with only the slightest tinge of outrage in his own voice. (Read "Obama's Challenge: Containing the AIG Bonus Outrage.")
Then he announced that he had instructed his Treasury Secretary, Timothy Geithner, to seek "every single legal avenue available to block" $165 million in bonuses that were awarded last week to the very same traders at AIG's financial-products division who made the bad bets in the first place. This was a politically necessary thing for Obama to say, even if it lacked a punch.
Obama promised weeks ago to stop the excessive bonuses on Wall Street, at a time when the existence of the coming AIG bonuses had already been disclosed by the excellent reporting of Bloomberg News. Obama's staff vowed more recently that the further infusion of taxpayer money into AIG, a firm now 80% controlled by the Federal Government, was appropriate and necessary. And now Obama was faced with the fact that his new executive-compensation policy, which applied to only a narrow subset of executives at a few institutions, was powerless to stop the worst violators at AIG from getting their undeserved payday. (See the worst business deals of 2008.)
On ABC's The View, Whoopi Goldberg spoke for the rest of the nation when she looked into the camera and said, as if to AIG executives, "You can't bend us over!"
But the sad truth is they can. And they probably will. And Obama, despite his popularity and moral indignation, has few tools to stop them. The Treasury Department has already concluded that the bonuses in question, which were first made public in late January, cannot be rescinded because they resulted from airtight contracts that had been signed in April 2008.
Furthermore, AIG's newly installed CEO, Edward M. Liddy, told Treasury last week that the AIG traders in question were still needed because only they could minimize the damage they had done. "AIGFP's books also contain a significant number of complex so-called bespoke transactions that are difficult to understand and manage," the company announced in a document sent to the Treasury by Liddy. "This is one reason replacing key traders and risk managers would not be practical on a large scale. Personal knowledge of the trades and the unique systems at AIGFP will be critical to an effective unwind of AIGFP's businesses and portfolios." In other words, the guy who just stabbed the nation in the gut is the only surgeon who can stop the bleeding. (See the top 10 scandals of 2008.)
And these people will now walk away with a significant payday: $165 million for about 400 employees, on top of $55 million the same people earned last year, a year that ended with AIG posting a $61.7 billion fourth-quarter loss, the largest quarterly loss in corporate history. (If it is any consolation, senior managers in the financial-products division will make about 43% less in 2008 than they did a year earlier, according to the company.) As Fed Chairman Ben Bernanke put it, "It makes me angry. I slammed the phone down more than a few times discussing AIG. I understand why the American people are so angry. It's absolutely unfair."
But like Obama, Bernanke and the rest of the political élite who lined up Monday to share their outrage are rather powerless to act. If AIG failed, almost all experts agree, the damage to the entire financial system would be horrific. So the leadership has little to do but posture. "Unconscionable," said House Speaker Nancy Pelosi. "Outrageous," said her Republican counterpart, John Boehner. Senator Chris Dodd, chair of the banking committee that failed to regulate AIG, called on the executives to "voluntarily" forgo their bonuses. The best the government looks able to do is insist on some tough new pay restrictions going forward before giving AIG its next installment of $30 billion.
Though Obama's tone fell somewhat short, he has proved that he understands the level of humiliation now being foisted on American taxpayers. He described the stakes of the current situation perfectly. "This is not just a matter of dollars and cents," the President said in the East Room. "It's about our fundamental values. All across the country, there are people who are working hard and meeting their responsibilities every single day without the benefit of government bailouts or multimillion-dollar bonuses."
But even as he described the problem, Obama offered little hope of exacting justice for past violations of the social compact. Instead, he asked the country to look forward, to an era of new regulations that will prevent a repeat of these failures. And he repeated again the outrage that most Americans now feel, with a little levity to lighten the mood. "I'm choked up with anger," he said, to cover for his coughs. It was a fleeting laugh for a nation steaming with fury.