President Barack Obama said he believes the global financial system remains at risk of implosion with the failure of Citigroup or AIG, touching off “an even more destructive recession and potentially depression.”
His remarks came in a “60 Minutes” interview in which he was pressed by an incredulous Steve Kroft for laughing and chuckling several times while discussing the perilous state of the world’s economy.
“You're sitting here. And you're— you are laughing. You are laughing about some of these problems. Are people going to look at this and say, ‘I mean, he's sitting there just making jokes about money—’ How do you deal with— I mean: explain. . .” Kroft asks at one point.
“Are you punch-drunk?” Kroft says.
“No, no. There's gotta be a little gallows humor to get you through the day,” Obama says, with a laugh.
The interview is Obama’s most detailed explanation yet of his view of the world economic crisis, and he makes clear that he’s afraid the nation hasn’t seen the worst of it – even invoking the possibility of a “depression” if a series of financial institutions collapse all at once.
He is quick to add that he’s “optimistic about that not happening. Because I think we did learn lessons from the Great Depression.”
But Obama also makes clear in the interview that he believes Wall Street’s high-risk, high-reward culture was a main cause of the economic meltdown. He takes aim at traders and executives in extremely personal terms – calling them ironically at one point “the best and the brightest” – and says that even today, those same executives don’t get just how much their recklessness contributed to a recession that he says deteriorated more quickly than he expected.
“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,” Obama says, with a chuckle.
“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— that I think everybody's looking for.”
He also said he doesn’t think Wall Street has gotten his message yet, and that he must do a better job conveying it to them:
“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,” Obama said. “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.”
Yet he stops short of endorsing legislation moving through Congress to tax nearly all the bonuses of executives at AIG — and clearly signaled his desire for changes in the legislation.
He says it’s important not to “govern out of anger.” And asked if the measure was constitutional, the former law professor said: “Well, I think that— as a general proposition, you don't want to be passing laws that are just targeting a handful of individuals…And as a general proposition, I think you certainly don't want to use the tax code—is to punish people.”
“So let's see if there are ways of doing this that are both legal, that are constitutional that uphold our basic principles of fairness, but don't hamper us from getting the banking system back on track,” Obama said. “That's why we're going to have to take a look at this legislation carefully.”
And in fact, Obama thi week will be turning to some of those very same Wall Street executives for help in bailing out banks and other financial institutions whose “toxic assets” are stopping up the global market for credit. He’s quick to add that he needs to do a better job conveying to them his belief in the market, and desire for it to succeed.
“Part of my job is to communicate to them, "Look, I believe in the market. I believe in financial innovation. And I believe in success." I want them to do well,” Obama said.
He also acknowledges that the recession has grown more serious more quickly than he expected, particularly regarding job losses. But he expresses hope that that quick decline might also make for a quicker-than-expected turnaround.
“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. . . but things may recover faster than they have in the past,” Obama said.
And he defended his embattled Treasury Secretary Timothy Geithner, telling Kroft that he wouldn’t accept his resignation if he tried to quit. Obama said jokingly that he’d respond: “Sorry Buddy, you've still got the job.”
The economy dominates the interview, which also ranges on topics such as his upcoming Afghanistan policy review and even his daughter’s new swing set at the White House.
On Afghanistan, Obama said he is looking for a “comprehensive strategy” that stresses diplomacy that includes engagement with neighboring Pakistan. While Obama is studying requests from the military for more troops, he warned that, “there's gotta be an exit strategy. There-- there's gotta be a sense that this is not perpetual drift.”
He said Afghanistan is a more complex problem than Iraq. “Iraq was actually easier than Afghanistan. It's easier terrain,” Obama told Kroft. “You've got a-- much better educated population, infrastructure to build off of. You don't have some of the same destabilizing border-- issues that you have between Afghanistan and Pakistan. And so this is going to be a tough nut to crack. But-- it is not acceptable for us to simply sit back and let safe havens of terrorists plan and plot.”
For all the challenges, Obama said, “the complexities of Afghanistan-- are matched, maybe even dwarfed, by the complexities of the economic situation.”
Obama also used the interview to criticize former Vice President Dick Cheney’s criticism of Obama’s decision to close Guantanamo Bay prison, where terror suspects are held. Since leaving office, Cheney has been an outspoken critic of Obama over the war on terror, saying Obama was taking steps to “raise the risk to the American people of another attack.”
“How many terrorists have actually been brought to justice under the philosophy that is being promoted by Vice President Cheney?” Obama asked. “It hasn't made us safer. What it has been is a great advertisement for anti-American sentiment.”