Handshake Diplomacy

Obama wins good headlines from the Summit of the Americas and unveils a politically risky plan to restructure bailout lending.

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President Obama is greeted with cautiously optimistic headlines as he returns home from Latin America. A new plan to avoid future bailouts may worry fiscal conservatives, but it might be just what the doctor ordered. Obama scores a 35 on the Change-o-Meter.

Obama’s trip to Latin America was as feel-good as any international Obama trip, evidenced by this morning’s newspapers’ cautious speculations that improved U.S.-Latin American relations will result from Obama’s appearance at the Summit of the Americas. The ‘Meter isn’t saying that’s a bad thing—it’s always nice to hope—but it’s glad that this trip yielded at least one concrete result in addition to handshakes: Hugo Chávez’s decision to reinstate the Venezuelan ambassador to the United States. Obama gets 15 points for another victory of personal diplomacy, albeit with a guy who will probably never have the United States’ best interests at heart.

Now that he’s home, Obama and his team are considering a creative but risky proposal to stretch the $700 billion that Congress authorized to bail out the nation’s foundering banks. The plan, which would convert the existing loans to banks into stock in the banks, would allow Obama to avoid a potentially ugly fight with Congress for more cash for banks. At the same time, however, it would give the government a big shareholder’s stake in several of the 19 banks to which it has lent money. Presidential aides downplay the chances of bank nationalization, but the mere talk of the government owning significant stock in the banks is politically risky. Obama get 15 points for going there in the first place.

Obama would have lost points for ducking a fight with Congress in favor of a risky proposal if it weren’t for the congressional resistance he’s been encountering on his other revenue-intensive plans. The ‘Meter thinks it’s better for Obama to avoid creating a situation that might delay health care reform and tosses in five points for picking his battles.

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