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The AIG scandal and impact on Obama

Obama would not have expected to be hit by popular anger so early, and hence the missteps that was visible in the early reaction by his administration to the scandal. After pumping huge amounts of money into many big banks, financial institutions, and other companies such as auto companies, there is a massive amount of public anger. For somebody who has just lost their job, or has their house taken away in a foreclosure, or is having to suffer the embarrassment of having to take free food, the concept of the Government supporting massive companies with public money is hard to take. After all, in simple terms (and even when you go through the whole complexity), the losses being suffered by the economy are directly attributed to the wrong economic policies that were being offered by a number of players in the financial sectors – these being banks, mortgage companies, investment banks, and other similar players.

So, when it became known that AIG was giving bonuses totalling in the hundreds of millions of dollars to its executives and other key people, and many of them were in fact part of the financial derivatives group within the company that caused the collapse of AIG, there was a huge outcry. Joe Smith, the average guy, was bound to scream and protest, and wanting action from the politicians. The politicians in turn were struck at 2 extremes. Here was a major public pressure to do something, and they were unable to respond because there was apparently legal advice that the bonuses were not revocable, and had to be granted. Politicians, being people with power and a need to showcase that they were in tune with public pressure, immediately crafted a bill that would get these bonuses back through taxes (never mind that many of these same politicians had voted to spend huge amounts of money in pork-barrel projects in the past, such as the Bridge to nowhere in Alaska).
Obama did not come out of this smelling of roses. Obama had come to power with a huge sentiment for him, that here is this young beacon of hope who will change things and take Government away from the usual wheeling-dealing ways and into a new era. However, Obama, like many other politicians, is finding that you can be hit by your own agenda; so, it would seem like that many of his actions were taken in the belief that there will not be much opposition (after all, he is the people’s darling). However, first in the manner of many of his initial nominations of whom some had to back down because of some defect in their past history, and now, in the matter of this AIG stuff, the Obama Administration is struggling.
First, Obama’s treasury secretary, Timothy F. Geithner was criticized for not doing enough to block these bonuses (in all fairness, the guy is up to his neck in trying to turn the economy around, and yet, it would be equally fair to expect him to keep track of any economic issue that could inflame public sentiment); and even more so, he was somewhat dismissive of the scandal initially; it was only later when the pressure started building up very rapidly did Obama start expressing his outrage so that it would seem like that he is also opposing these bonuses to ‘fatcats’. He eventually used his weapon of claiming full responsibility and trying to defuse the situation, a policy that seems to have worked to some extent. However, Obama has to contend with this bill that would add a huge amount of tax to any bonuses for companies that have received money from the Government, and a number of such institutions are opposing any such bill.
One lesson from this episode for Obama would be to not keep on expecting that his popularity will defuse issues; the Republicans are still smarting from the drubbing that they received, and will use any opportunity to highlight issues that could crack the high popularity of Obama.

1 comment to The AIG scandal and impact on Obama

  • june

    America is sleeping while a few greed rich elite take over America and the world using Obama puppet (New world \order is here- do you really believe the Wall street crash was not engineered by the Federal Reserve bank( which is a private entity) and is above the law?? think again
    and watch all starting from 1

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