Is Obama Losing His Populist Fire?

A stray comment about bank bonuses ignites Paul Krugman

In an interview with Bloomberg News, President Obama made a comment that some are construing as a defense of bank bonuses. When asked about the multi-million-dollar pay packages of Lloyd Blankfein and Jamie Dimon, CEOs of Goldman Sachs and J.P. Morgan respectively, Obama replied:

Well, look, first of all, I know both those guys. They're very savvy businessmen. And I, like most of the American people, don't begrudge people success or wealth. That's part of the free market system. I do think that the compensation packages that we've seen over the last decade at least have not matched up always to performance. I think that shareholders oftentimes have not had any significant say in the pay structures for CEOs. ...

Listen, $17 million [the size of Jamie Dimon's bonus] is an extraordinary amount of money. Of course, there are some baseball players who are making more than that who don’t get to the World Series either. So I’m shocked by that as well. I guess the main principle we want to promote is a simple principle of "say on pay," that shareholders have a chance to actually scrutinize what CEOs are getting paid. And I think that serves as a restraint and helps align performance with pay. The other thing we do think is the more that pay comes in the form of stock that requires proven performance over a certain period of time as opposed to quarterly earnings is a fairer way of measuring CEOs' success and ultimately will make the performance of American businesses better.

Paul Krugman and others sees these these comments as an outrageous defense of wild bank bonuses. Whether they're right or not they've spurred debate about Obama's approach to financial reform and the sincerity of his populism. So is the president a bank-busting populist or friend to Wall Street? Or maybe somewhere between?

• 'Oh. My. God.'  That's New York Times Nobel-winner Paul Krugman's outraged response. "[B]ank executives are not free agents who are earning big bucks in fair competition; they run companies that are essentially wards of the state. There's good reason to feel outraged at the growing appearance that we're running a system of lemon socialism, in which losses are public but gains are private. And at the very least, you would think that Obama would understand the importance of acknowledging public anger over what’s happening."

• Comments Overblown, But...  Politics blogger Greg Sargent reads Obama's comments as more about checking bonuses than supporting bonuses. "That said, that substance was bound to be overshadowed by Obama's praise for the businessmen as 'savvy,' his general unwillingness to 'begrudge' wealth, and his discussion of their outsized bonuses in the context of the 'free market system,' which seems off key, given the massive taxpayer bailouts of the financial industry."

• Obama Just Isn't a Populist  So assesses liberal blogger Digby. "The only thing you can conclude is that this is a matter of principle for him and that he truly believes that these people are worth that kind of money despite the fact that they nearly destroyed the world financial system and are benefiting from its chaos and failure. And it clarifies once and for all that he doesn't understand the very real angst out in the country and the desperate need to hold someone, somewhere, accountable for what's gone wrong."

• Bonuses Not 'Free Market' at All  Economist Simon Johnson notes that the banks whose CEOs receive huge bonuses are protected as "too big to fail," making them not so much "part of the free market system" as Obama said. Johnson writes, "The president's only political chance is to take on the too big to fail banks directly and clearly. He needs to explain where they came from (answer: the Reagan Revolution, gone wrong), how the problem became much worse during the last administration, and how - in credible detail - he will end their reign."

• White House Needs Bankers  National Review's Daniel Foster thinks Obama doesn't want to alienate them. "Perhaps the president's softening toward capitalism has something to do with the fact that fewer Wall Street CEOs are flocking to his $30,000-a-head steak and lobster dinners ever since the phrase 'fat cat' gained currency in Washington. But in any event, the president's praise of the free market is about as bland and uncontroversial as it gets."