I've blogged already about the startling inconsistencies between AIG's statements about the risky business remaining at AIG-FP and statements from AIG-FP's own chief operating officer.

What has prompted this second post are the startling claims by senior Obama officials that the AIG bonus scandal is a "distraction" and "not what people are talking about".

Like many other readers, I am a strong Obama supporter who remains completely mystified by the comments from David Axelrod and Rahl Emmanuel.  Their disingenuous, "move on, folks, nothing to see here" remarks would only make sense to me if the framework and details of the AIG bailout had been orchestrated on their watch.

Why on earth aren't Obama officials reminding everyone that the AIG bailout was a Bush administration initiative?  Wouldn't it be more logical for this administration to say "hey, we don't want to do some of this stuff, but our predecessor made these commitments and we can't have the Federal Government going back on its word"?  With so many initiatives being unveiled at a breath-taking pace, why would a scandal that, in its tip-of the-iceberg way, points to the serious need for structural reform in financial markets uniquely qualify as a "distraction"?

These comments reek of business-as-usual.  True, the Democratic Party's Wall Street connections go back to before the Civil War and, thanks to generous campaign contributions, will always be with us to some degree. It's probably not realistic to expect a government fix of the credit markets without involving well-compensated and possibly culpable insiders, especially when the structure of the bailout was set in place by a previous Republican administration.  But isn't it self-defeating for an administration whose claim to fame is its broad-based populism to go out of its way to frame the discussion over AIG's bonuses by lining up with Rush Limbaugh, as if the main goal for key spokespersons on both side of the aisle was to deflate or redirect passion invested in anger at the reckless behavior of major financial institutions?

The long-lasting achievements of the Roosevelt New Deal were structural reforms: social security, minimum wages and maximum hours, the re-structuring of the banking system and so on.  The Obama administration, which clearly prides itself on its multitasking, needs to advance a reform agenda as the natural complement to its attempt to revive the economy.  Otherwise, what looks like recovery will simply be another bubble waiting to burst.

And an administration that was looking like a breath of fresh air will begin to stink like a smoke-filled room.