Obama 'punch drunk?' -- 'Gallows humor'

by Mark Silva

When President Barack Obama chuckled at his own acknowledgement of how unpopular the federal government's bailout of the automobile industry is, his interviewer asked the president if he is "punch drunk.''

"I just wanna say that the only thing less popular than putting money into banks is putting money into the auto industry," Obama conceded. As CBS News' Steve Kroft noted in a 60 Minutes talk with Obama last night that just 18 percent of those surveyed support it, Obama said with a laugh: "It's not a high number.''

"You're sitting here. And you are laughing,'' Kroft said. "You are laughing about some of these problems. Are people gonna look at this and say, 'I mean, he's sitting there just making jokes about money.' How do you deal with, I mean, explain the...mood and your laughter... Are you punch drunk?"

"No, no. There's gotta be a little gallows humor to get you through the day," the president explained. "You know, sometimes my team talks about the fact that if you had said to us a year ago that the least of my problems would be Iraq, which is still a pretty serious problem, I don't think anybody would have believed it. But we've got a lot on our plate. And a lot of difficult decisions that we're gonna have to make."

Obama allowed that he was surprised by the depth of recession underway when he took office in January.

"I don't think that we anticipated how steep the decline would be, particularly in employment,'' the president said in the interview aired by 60 Minutes. "I mean if you look at just, you know, hundreds of thousands - now millions - of jobs being shed over the course of two months or three months, that slope is a lot steeper than anything that we've said we've seen before.

"Now, there's a potential silver lining, which may be that things are so accelerated now, the modern economy is so intertwined and wired, that things happen really fast for ill, but things may recover faster than they have in the past," he said.

His administration predicts a turnaround by year's end, with his lead economic adviser saying over the weekend that the economy should "bottom out'' sometime this year.

"We're already starting to see flickers of hope out there,''Obama said. "Refinancings have significantly increased. Interest rates have never been lower. That promises the possibility at least of the housing market bottoming out and stabilizing. It's not going to happen equally in every part of the country.''

The president was asked if he was surprised by the intensity of the hostility over the nearly $200 million in bonuses paid by the bailed-out American International Group to executives after collecting nearly $200 billion in federal assistance.

"I wasn't surprised by it,'' Obama said. "Our team wasn't surprised by it. The one thing that I've tried to emphasize, though, throughout this week, and will continue to try to emphasize during the course of the next several months as we dig ourselves out of this economic hole that we're in, we can't govern outta anger.

"We've got to try to make good decisions based on the facts in order to put people back to work, to get credit flowing again,'' he said. "And I'm not gonna be distracted by what's happening day to day. I've gotta stay focused on making sure that we're getting this economy moving again.''

However, the president distanced himself from the 90 percent tax on those bonuses that the House has approved in retribution - with the Senate slated to address its own approach this week.

"I think that as a general proposition, you don't wanna be passing laws that are just targeting a handful of individuals,'' said Obama, whose credentials as a constitutional law professor in Chicago were noted in the question by CBS News' Steve Kroft.

"You wanna pass laws that have some broad applicability,'' the president said. "And as a general proposition, I think you certainly don't wanna use the tax code to punish people.

"I think that you've got a pretty egregious situation here that people are understandably upset about,'' he said. "And so let's see if there are ways of doing this that are both legal, that are constitutional, that upholds our basic principles of fairness, but don't hamper us from getting the banking system back on track...

"We're gonna have to take a look at this legislation carefully,'' he said,. "Clearly, the AIG folks gettin' those bonuses didn't make sense. And one of the things that I have to do is to communicate to Wall Street that, given the current crisis that we're in, they can't expect help from taxpayers but they enjoy all the benefits that they enjoyed before the crisis happened.

"You get a sense that, in some institutions, that has not sunk in; that you can't go back to the old way of doing business, certainly not on the taxpayers' dime," Obama said. "Now the flip side is that Main Street has to understand, unless we get these banks moving again, then we can't get this economy to recover. And we don't wanna cut off our nose to spite our face.''

The president defended Treasury Secretary Tim Geithner, and maintained that there has been no discussion within the White House about replacing him in the midst of growing criticism.

"No, and shouldn't (resign),'' Obama said. "And if he were to come to me, I'd say, 'Sorry, Buddy. You've still got the job.' But look, he's got a lot of stuff on his plate. And he is doing a terrific job. And I take responsibility for not, I think, having given him as much help as he needs."

The critics include Warren Buffett, the billionaire investor who has supported Obama but questions his Treasury strategy.

"And Warren still does support me,'' Obama said. "But I think that understand Warren's also a big player in the financial markets who's a major owner of Wells Fargo. And so he's got a perspective from the perspective of somebody who is part-owner of a bank. You've got members of Congress who've got a different perspective. Which is, 'We don't wanna spend any more taxpayer money.' You've got a whole host of players, all of whom may have a completely different solution. Right?"

"And you know, one of the challenges that Tim Geithner has had is the same challenge that anybody would have in this situation. People want a lot of contradictory things. You know, the banks would love a lot of taxpayer money with no strings attached. Folks in Congress, as well as the American people, would love to fix the banks without spending any money. And so at a certain point, you know, you've got just a very difficult line to walk...

"Part of my job is to communicate to (the financial community). "Look, I believe in the market. I believe in financial innovation. And I believe in success. I want them to do well. But what I also know is that the financial sector was out of balance. You look at how finance used to operate just 20 years ago, or 25 years ago. People, if you went into investment banking, you were making 20 times what a teacher made. You weren't making 200 times what a teacher made...

"I've told them directly, 'cause I've heard some of this,'' the president said. "They need to spend a little time outside of New York. Because you know, if you go to North Dakota, or you go to Iowa, or you go to Arkansas, where folks would be thrilled to be making $75,000 a year without a bonus, then I think they'd get a sense of why people are frustrated.

""I think we have to understand the severity of the crisis that we're in right now. The fact is that, because of bad bets made on Wall Street, there have been enormous losses. I mean there were a whole bunch of folks who, on paper, if you looked at quarterly reports, were wildly successful, selling derivatives that turned out to be...completely worthless.... And they were insuring them.

""Now you know, gosh, I don't think it's me being anti-Wall Street just to point out that the best and the brightest didn't do too well on that front, and that you know, maybe the incentive structures that have been set up have not produced the kinds of long term growth that I think everybody's looking for...

"If we don't get a handle on this, and also start looking at our long-term deficit projections, at a certain point people will stop buying those Treasury Bills," Obama said.