Obama faces growing ire over AIG bonus payouts

Washington | Updated: Mar 20 2009, 06:48am hrs
President Barack Obama is grappling with the AIG bonus furore by both accepting responsibility for the governments failure to head off the payments and blaming it on the big mess he inherited.

He is working to protect treasury secretary Timothy Geithner, who began his tenure under a cloud over unpaid taxes and is now taking heat from Republican lawmakers for not heading off the bonuses before they were paid out.

The flap over AIGs payment of $165 million in bonuses to executives after the insurance giant got up to $180 billion in government aid has inflamed Americans, already impatient with the governments billion-dollar bailouts of firms that helped pitch the US economy into crisis.

The controversy is blanketing the airwaves and taking attention away from Obamas efforts to rescue the US economy and the big agenda he has laid out for long-term goals, such as healthcare and global warming.

Saying Americans were right to be angry, Im angry, Obama has had to spend most of the week dealing with it--condemning the bonuses and discussing options for getting the money back and preventing a repetition.

Pressed on whether he wished he had known sooner about the bonuses, Obama, a Democrat, told reporters on Wednesday that ultimately Im responsible, while returning to a theme he has used repeatedly, that he inherited big problems from his Republican predecessor, George W Bush.

Weve got a big mess that were cleaning up, he said. Nobody here drafted those contracts.

Nobody here was responsible for supervising AIG and allowing themselves to put the economy at risk by some of the outrageous behaviour that they were engaged in. Obama has enjoyed job approval ratings of about 60% in the nearly eight weeks since he took office and his biggest achievement thus far was steering a $787-billion stimulus package through the US Congress.

With Americans up in arms about bonuses to discredited executives, Obama may find it tougher to sell an economic agenda expected to include a request for more bank bailout moneya step many economists say is needed to bolster the weak underpinning of the U.S. financial system.

A CBS News poll conducted last weekend found dwindling support for bailouts--only 37% of Americans backed giving money to banks and financial institutions, while 53% were opposed. I think theres a danger here that when they are seen as doing stuff that a lot of the public really dislikes, then it makes it harder to do the next thing, said Merle Black, a political science professor at Emory University in Atlanta.

There is a growing sense among some political experts that Obamas ability to pin US economic problems on Bush may be running its course. That excuse still works partly, but its already getting old, said Larry Sabato, a political science professor at the University of Virginia. It isnt going to work much longer.

Obama is expressing complete confidence in Geithner in the midst of a Washington feeding frenzy over who knew what when. Geithner said he knew about the bonuses on March 10 and told the White House two days later. The news broke publicly last weekend.

Senate Minority Leader Mitch McConnell, a Kentucky Republican, has questioned all week why the treasury department did not lay down conditions about bonuses before handing over $30 billion to AIG two weeks ago.

The treasury department was supposed to be minding the store, he said on Wednesday. It was treasurys responsibility to watch how these funds were used. Obviously, they fell asleep on the job.

Presidential scholar Stephen Hess, a professor at George Washington University, said Geithner should have immediately alerted the White House. Theres some news that you immediately send up to the top. You dont sit on it, he said.

Republican strategist Scott Reed said the controversy could embolden Democrats who control Congress to challenge the President. Youre seeing it from his own party--the Democrats are starting to step out a little bit against this White House, he said.

Reuters