http://www.nytimes.com/2009/03/22/opinion/22rich.html?_r=1&em Has a âKatrina Momentâ Arrived? By FRANK RICH Published: March 21, 2009 A CHARMING visit with Jay Leno wonât fix it. A 90 percent tax on bankersâ bonuses wonât fix it. Firing Timothy Geithner wonât fix it. Unless and until Barack Obama addresses the full depth of Americansâ anger with his full arsenal of policy smarts and political gifts, his presidency and, worse, our economy will be paralyzed. It would be foolish to dismiss as hyperbole the stark warning delivered by Paulette Altmaier of Cupertino, Calif., in a letter to the editor published by The Times last week: âPresident Obama may not realize it yet, but his Katrina moment has arrived.â Six weeks ago I wrote in this space that the countryâs surge of populist rage could devour the presidentâs best-laid plans, including the essential Act II of the bank rescue, if he didnât get in front of it. The occasion then was the Tom Daschle firestorm. The White House seemed utterly blindsided by the publicâs revulsion at the moneyed insidersâ culture illuminated by Daschleâs post-Senate career. Yet last weekâs events suggest that the administration learned nothing from that brush with disaster. Otherwise it never would have used Lawrence Summers, the chief economic adviser, as a messenger just as the A.I.G. rage was reaching a full boil last weekend. Summers is so tone-deaf that he makes Geithner seem like Bobby Kennedy. Bob Schieffer of CBS asked Summers the simple question that has haunted the American public since the bailouts began last fall: âDo you know, Dr. Summers, what the banks have done with all of this money that has been funneled to them through these bailouts?â What followed was a monologue of evasion that, translated into English, amounted to: Not really, but you little folk neednât worry about it. Yet even as Summers spoke, A.I.G. was belatedly confirming what he would not. It has, in essence, been laundering its $170 billion in taxpayersâ money by paying off its reckless partners in gambling and greed, from Goldman Sachs and Citigroup on Wall Street to SociÃ©tÃ© GÃ©nÃ©rale and Deutsche Bank abroad. Summers was even more highhanded in addressing the âretention bonusesâ handed to the very employees who brokered all those bad bets. After reciting the requisite outrage talking point, he delivered a patronizing lecture to viewers of ABCâs âThis Weekâ on how our âtradition of upholding lawâ made it impossible to abrogate the bonus agreements. It never occurred to Summers that Americans might know that contracts are renegotiated all the time â most conspicuously of late by the United Automobile Workers, which consented to givebacks as its contribution to the Detroit bailout plan. Nor did he note, for all his supposed reverence for the law, that the A.I.G. unit being rewarded with these bonuses is now under legal investigation by British and American authorities. Within 24 hours, Summersâs stand was discarded by Obama, who tardily (and impotently) vowed to âpursue every single legal avenueâ to block the bonuses. The question is not just why the White House was the last to learn about bonuses that Democratic congressmen had sought hearings about back in December, but why it was so slow to realize that the publicâs anger couldnât be sated by Summersâs legalese or by constant reiteration of the word outrage. By the time Obama acted, even the G.O.P. leader Mitch McConnell was ahead of him in full (if hypocritical) fulmination. David Axelrod tried to rationalize the lagging response when he told The Washington Post last week that âpeople are not sitting around their kitchen tables thinking about A.I.G.,â but are instead âthinking about their own jobs.â While thatâs technically true, it misses the point. Of course most Americans donât know how A.I.G. brought the worldâs financial system to near-ruin or what credit-default swaps are. They may not even know what A.I.G. stands for. But Americans do make the connection between their fears about their own jobs and their broad understanding of the A.I.G. debacle. They know that the corporate bosses who may yet lay them off have sometimes been as obscenely overcompensated for failure as Wall Streetâs bonus babies. As The Wall Street Journal reported last week, chief executives at businesses as diverse as Texas Instruments and the home builder Hovnanian Enterprises have received millions in bonuses even as their companiesâ shares have lost more than half their value. Since Americans get the big picture of this inequitable system, that grotesque reality dwarfs any fine print. Thatâs why it doesnât matter that the disputed bonuses at A.I.G. amount to less than one-tenth of one percent of its bailout. Or that CNBC â with 300,000 viewers on a typical day by Nielsenâs measure â is a relatively minor player in the crash. Or that Edward Liddy had nothing to do with A.I.G.âs collapse, or that John Thain, of the celebrated trash can, arrived after, not before, others wrecked Merrill Lynch. These prominent players are just the handiest camera-ready triggers for the larger rage. Passions are now so hot that even Bernie Madoffâs crimes began to pale as we turned our attention to A.I.G.âs misdeeds, just as A.I.G. will fade when the next malefactor surfaces. What made Jon Stewartâs takedown of Jim Cramer resonate was less his specific brief against CNBCâs cheerleading for bad stocks than his larger indictment of the gaping economic inequality that defined the bubble. As Stewart said, there were âtwo marketsâ â the long-term market that Americans earnestly thought would sustain their 401(k)âs, and the fast-moving, short-term âreal marketâ in the back room where high-rolling insiders wagered âgiant piles of moneyâ and brought down everyone with them. No one is more commanding on this subject than our president. In his town-hall meeting in Costa Mesa, Calif., on Wednesday, he described the A.I.G. bonuses as merely a symptom of âa culture where people made enormous sums of money taking irresponsible risks that have now put the entire economy at risk.â But rhetoric wonât tamp down the anger out there, and neither will calculated displays of presidential âoutrage.â We must have governance to match the message. To get ahead of the anger, Obama must do what he has repeatedly promised but not always done: make everything about his economic policies transparent and hold every player accountable. His administration must start actually answering the questions that officials like Geithner and Summers routinely duck. Inquiring Americans have the right to know why it took six months for us to learn (some of) what A.I.G. did with our money. We need to understand why some of that money was used to bail out foreign banks. And why Goldman, which declared that its potential losses with A.I.G. were âimmaterial,â nonetheless got the largest-known A.I.G. handout of taxpayersâ cash ($12.9 billion) while also receiving a TARP bailout. We need to be told why retention bonuses went to some 50 bankers who not only were in the toxic A.I.G. unit but who left despite the âretentionâ jackpots. We must be told why taxpayers have so little control of the bailed-out financial institutions that we now own some or most of. And where are the M.R.I.âs from those âstress testsâ the Treasury Department is giving those banks? Thatâs just a short list. In general, itâs hard to imagine taxpayers shelling out billions for a second bank bailout unless thereâs a full accounting of every dime of the first, and true transparency for the new plan whose rollout is becoming the most attenuated striptease since the heyday of Gypsy Rose Lee. Another compelling question connects all of the above: why has there been so little transparency and so much evasiveness so far? The answer, I fear, is that too many of the administrationâs officials are too marinated in the insidersâ culture to police it, reform it or own up to their own past complicity with it. The âdirty little secret,â Obama told Leno on Thursday, is that âmost of the stuff that got us into trouble was perfectly legal.â An even dirtier secret is that a prime mover in keeping that stuff legal was Summers, who helped torpedo the regulation of derivatives while in the Clinton administration. His mentor Robert Rubin, no less, wrote in his 2003 memoir that Summers underestimated how the risk of derivatives might multiply âunder extraordinary circumstances.â Given that Summers worked for a secretive hedge fund, D. E. Shaw, after he was pushed out of Harvardâs presidency at the bubbleâs height, you have to wonder how he can now sell the administrationâs plan for buying up toxic assets with the help of hedge funds. It will look like another giveaway to his own insidersâ club. As for Geithner, people might take him more seriously if he gave a credible account of why, while at the New York Fed, he and the Goldman alumnus Hank Paulson let Lehman Brothers fail but saved the Goldman-trading ally A.I.G. As the nationâs anger rose last week, the president took responsibility for whatâs happening on his watch â more than he needed to, given the disaster he inherited. But in the credit mess, action must match words. To fall short would be to deliver us into the catastrophic hands of a Republican opposition whose only known economic program is to reject job-creating stimulus spending and root for Obama and, by extension, the country to fail. With all due deference to Ponzi schemers from Madoff to A.I.G., this would be the biggest outrage of them all.