Economics

We Are Very Concerned About the Anger We're Fomenting

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Here's a bizarre Adam Nagourney piece in today's New York Times:

The Obama administration is increasingly concerned about a populist backlash against banks and Wall Street, worried that anger at financial institutions could also end up being directed at Congress and the White House and could complicate President Barack Obama's agenda.

The administration's sharp rebuke of the American International Group on Sunday for handing out $165 million in executive bonuses — Lawrence H. Summers, director of the president's National Economic Council, described it as "outrageous" on "This Week" on ABC — marks the latest effort by the White House to distance itself from abuses that could feed potentially disruptive public anger.

"We've got enormous problems that need to be addressed," David Axelrod, Mr. Obama's senior adviser, said in an interview. "And it's hard to address because there's a lot of anger about the irresponsibility that led us to this point." […]

[A] shifting political mood challenges Mr. Obama's political skills, as he seeks to acknowledge the anger without becoming a target of it. A central question for Mr. Obama is whether his cool style — "in a time of crisis, we cannot afford to govern out of anger," he said in his address to Congress last month — will prove effective when the country may be feeling more emotional.

Got that? The administration is "increasingly concerned about a populist backlash," so then feeds into it, and then complains about it, all while the president continues to merit (undeserved) praise for the New York Times for his "cool style," even though he has been bashing Wall Street and banks in such non-inconspicuous settings as a nationally televised speech in front of a joint session of Congress.

I suspect that what the administration might really be worried about is that there's a glaring contradiction at the intersection of its messaging and policy. Officials talk like they're really gonna stick it to AIG this time, then they ladle out another $20 billion. You want to punish a banker or a Wall Street executive? Let his company fail. And if he's broken the law, prosecute him.

Instead, the plan seems to be throw taxpayer money at whoever's too big to fail this week (including companies that don't even want the money), then channel all that anger into public shaming exercises of CEOs, coupled with new requirements driven by politics instead of profit and loss. The real threat that populist anger poses for Obama is that it may focus attention on the yawning gap between his word and deed.