Obama’s Real Test

Thomas Friedman weighs in on AIG and Obama.

When you hear a sitting U.S. senator call for bankers to commit suicide, you know that the anger level in the country is reaching a “Bonfire of the Vanities,” get-out-the-pitchforks danger level. It is dangerous for so many reasons, but most of all because this real anger about A.I.G. could overwhelm the still really difficult but critically important things we must do in the next few weeks to defuse this financial crisis.

That's a very good, important point: This is by no means over; there is a lot more heavy lifting to be done yet.

Let me be specific: If you didn’t like reading about A.I.G. brokers getting millions in bonuses after their company — 80 percent of which is owned by U.S. taxpayers — racked up the biggest quarterly loss in the history of the Milky Way Galaxy, you’re really not going to like the bank bailout plan to be rolled out soon by the Obama team. That plan will begin by using up the $250 billion or so left in TARP funds to start removing the toxic assets from the banks. But ultimately, to get the scale of bank repair we need, it will likely require some $750 billion more.

I can hear the Republicans howling already.

I live in Montgomery County, Md. The schoolteachers here, who make on average $67,000 a year, recently voted to voluntarily give up their 5 percent pay raise that was contractually agreed to for next year, saving our school system $89 million — so programs and teachers would not have to be terminated. If public schoolteachers can take one for schoolchildren and fellow teachers, A.I.G. brokers can take one for the country.

Don't hold your breath, Tom.

Unfortunately, all the money we have already spent on A.I.G. and the banks was just to prevent total system failure. It was just to keep the body alive. That’s why healing the system will likely require the rest of the TARP funds, plus the $750 billion the administration warned Congress in the new budget that it could need.

Another one trillion. That'll go down well on Main Street, huh?

The only person with the clout to sell something this big is President Obama. The bankers and Congress will have to help; every citizen will have to swallow hard. But ultimately, Mr. Obama will have to persuade people that this is the least unfair and most effective solution. It will be his first big leadership test. It is coming soon, and it is coming to a theater — and a bank — near you.

It will be some hell of a fight.