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12:03

Fred Barbash-Moderator - Good afternoon all and welcome to POLITICO's Arena Live. The topic of the day--of the week-is AIG. As with our discussion yesterday, a critical question here is whether this episode will make it all the more difficult for the administration to seek and obtain Congressional approval for further bailout funds. If it does, it becomes a lot more serious than a "public relations" flap.

A deeper question, which Arena contributors address today, is the level of confidence Americans have--or don't have--in Team Obama's capacity to address the economic crisis. In particular, how much confidence do we have in Tim Geithner?

Speaking personally--but of course trying hard not to express an opinion: I keep seeing economists from various positions on the spectrum, questioning the administration's approach to the banking crisis in particular. Geithner's approach may or may not be the right one, but the commentary from smart specialists in this field raises fundamental questions.

One also wonders whether the administration is listening. Yesterday we had Tom Ricks here, author of Fiasco and The Gamble, who reminded us how easily administrations can become insular in their thinking. I think it's a litle early to make this kind of assessment on the Obama administration. But the potential is there for any administration to dig in and abandon the kind of flexibility that is so essential in actual war, or in this war to rescue the capital markets.

What are your thoughts? How damaging is the AIG bonus controversy? How does the administration recover from it?

12:07

[Comment From Aaron Rabinowitz]
I'm starting to feel the same pity for Geithner that I discovered for Nancy Pelosi. It must be hard working with Obama the untouchable and being marked as the whipping boy instead because you're not as well liked as Obama.

12:07

[Comment From Joe Sewell]
Just add the $150 million or whatever the bonus total is onto the next billion we sent AIG. We send $1 billion-they owe $1.15 billion

12:08

Fred Barbash-Moderator - Here's what Arena contributor Larry Sabato posted a few minutes ago:

"The Obama team is missing so many critical appointments in Treasury and elsewhere that it is impossible to know whether we should have more or less confidence. Let’s hope the holes are filled and/or confirmed quickly. This is a crisis, and the tug-of-war rope needs to be fully manned. As far as Secretary Geithner is concerned, he is simply not an effective public spokesperson. The populist public wants some derriere-kicking, not derriere-kissing. Geithner is better suited to the board rooms than the barricades. He should let others channel the deep anger of a provoked citizenry."

12:10

Fred Barbash-Moderator - And here's what Arena contributor Tom Mann posted:

Truth be told, I don't know (and I suspect no one does with any certainty) whether the steps being taken by the Administration and the Fed will be effective in stabilizing the global financial meltdown. My sense is that their initiatives are better than critics acknowledge and with additional public resources, policy adjustments, and global leadership we will come through this crisis. The major challenge is getting hold of the populist outrage that could lead to destructive action or inaction. This is a task for the President, not the Treasury Secretary.

12:10

[Comment From Aaron Rabinowitz]
I love that Rick Santeli is defending the bonuses by trying to put them in context. I guess his love affair with populism was more of a one night stand.

12:11

Fred Barbash-Moderator - From Julian Zelizer: "What is clear eight weeks into the administration is how extraordinarily complicated the policy solutions to this financial crisis will be. While President Obama is on a political timetable, meaning that he needs to achieve some financial stability before his approval ratings start to fall to a point that he is politically weak, there is no reason to think that he would be able to solve this entire problem in a single shot. Political scientists talk about "policy learning" and that is what we are seeing from the administration. They are analyzing, evaluating, and testing, figuring out what the best plan of action is to restore economic growth. One could argue that it is better to have an administration making sure that it gets the plan right rather than an administration jumping hastily into one particular solution that turns out to be ineffective."

12:12

[Comment From Michelle]
Every week we hear an outrage over how big the execs paychecks are, how they got bonsues and even some have been critical of what an exec spent on his office trash bin. The outrage dosen't come from the bonuses but comes from the public's anger over public funds given to private companies. Obama needs to stop the welfare altogether as I don't think any more handouts are going to fly well with the public.

12:13

[Comment From Michael]
It is becoming increasingly clear that beyond President Obama's speaking abilities and political rehtoric, he does very poorly with details, the failure to manage bonus's at AIG, which is small compared to the billions and trillions he is spending on bailouts and stimulus, gives credence to the growing echo's of his INCOMPETENCE to lead. Any future spending plans must be presented with details, something Obama has been lacking his entire career.

12:13

Fred Barbash-Moderator - Here's the post from Arena contributor Rick Beyer: "Geithner should let the AIG bonus babies know that the full wrath of the federal government is about to be unleashed upon them unless they make amends. He can inform them that that Treasury smells tax fraud, and that each of them is going to get the most excruciating audit the IRS knows how to do, going back the full seven years. He can let them know that Eric Holder is ready and waiting to announce a RICO investigation, seize their assets, and begin putting together a prosecution. He can further inform them that the names and addresses of all the bonuses will be made public so that an adoring public can give each of them our thanks. Oh, yes, and he can also threaten to fire them. Of course, they can avoid all this, Dr. Tim can sweetly whisper, by unanimously agreeing to return 2/3 of that bonus money.

Heavy handed? Yes. But given the public clamor for blood, and the near-unanimous view that this is outrageous, I think the government has a lot of leeway to put some serious pressure on these folks, and should. Of course the threat will work better if it is veiled, and there is no need to carry it out. But it is silly to suggest that the Feds have no leverage.

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