Love the Banks, Hate the Bankers

The latest bailout effort strikes a dissonant chord against last week’s furor.

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President Obama announces a plan to rescue toxic bank assets, but not in a way that will get America’s mind off all that AIG business. His sense of responsibility for the war in Afghanistan rescues him for a 15 on the Change-o-Meter.

This morning, embattled Treasury Secretary Timothy Geithner announced the details of the Obama administration’s bank-asset rescue plan. Bloggers and politicos haven’t quite caught up with criticism yet (hey, it’s Monday), but that doesn’t mean the administration is home-free. New York Times columnist Paul Krugman has already gone for the jugular, likening the plan to the “cash for trash” policy that the Bush administration gave up on six months ago. Krugman blasts the Obama administration for taking the easy way out and artificially driving up the price of toxic bank assets with “financial hocus-pocus” instead of merely guaranteeing bank debts. Ouch. Others are sure to follow. It’s never a good sign for your multibillion-dollar bank-rescue plan when the economist-prince of the Times op-ed page is at the front of the pundit pack. Add 10 for trying, but subtract five for ensuing poor reviews.

What’s more (speaking of public opinion), the timing of the plan’s announcement was far from optimal: It comes after a week during which, as E.J. Dionne notes, the Obama team refused to stay on message about the AIG bonuses. Chief economic adviser Larry Summers had said the administration can’t govern out of anger, but then Obama said in so many words that it very well could, giving Geithner marching orders to “use that leverage and pursue every single legal avenue to block these bonuses.” Today, Obama and his aides are wary of Congress’ proposal to tax the AIG bonuses to Timbuktu.

Obama risks political capital with every further step to salvage banks that made poor choices as the housing bubble grew. This is no time to feed the “rewarding Wall Street” narrative that ruffled so many feathers last week, especially when the president’s got big plans for health care and education. (See the Times’ Sheryl Gay Stolberg on the psychology of ignoring the important stuff.) Still, the ‘Meter docks five; with confidence so vital to economic recovery, a clear message from the White House is essential.

Does this mean the ‘Meter is a big goose egg? Hardly. Yesterday on 60 Minutes, Obama spoke two words that have spent the last eight years exiled from the president’s vocabulary: “exit strategy.” Just more than a month after announcing a buildup of 17,000 troops in Afghanistan, Obama said that the United States and NATO must look for a way out of the war in Afghanistan because “there’s got to be a sense that this is not perpetual drift.” For remembering that troops can come out of battle as well as go in, Obama gets 15 points.

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