US govt braces for bailout backlash

The Obama administration is increasingly concerned about a populist backlash against banks and Wall Street,worried that anger....

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 Obamas agenda.

The administrations sharp rebuke of the American International Group on Sunday for handing out 165 million in executive bonuses Lawrence H Summers,director of the presidents 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. Weve got enormous problems that need to be addressed, David Axelrod,Obamas senior adviser,said in an interview. And its hard to address because theres a lot of anger about the irresponsibility that led us to this point.

This has been welling up for a long time, he said. Obamas aides said any surge of such a sentiment could complicate efforts to win Congressional approval for the additional bailout packages that Obama has signaled will be necessary to stabilize the banking system.

As it is,there have already been moves in Congress to limit compensation to executives at banks and Wall Street firms that are receiving government help to survive. Beyond that,a shifting political mood challenges Obamas political skills,as he seeks to acknowledge the anger without becoming a target of it. A central question for 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.

Even as Summers was denouncing AIG for the bonuses,he suggested that there was little if anything the government could do to stop them,seconding the conclusion of Treasury Secretary Timothy F Geithner. But even if their reasoning was legally sound,they also risked having the administration look ineffectual in the face of what Summers said was the worst financial abuse of the last 18 months,since the economy began turning down in earnest.

Never underestimate the capacity of angry populism in times of economic stress, said Robert Reich,a professor of public policy at the University of California,Berkeley,and labor secretary under President Bill Clinton.