When the president of the United States discusses the effects of credit default swaps on a late-night TV talk show, you know:
(a) the world has gone mad;
(b) it's not sweeps month; or
(c) President Obama has become the explainer in chief for America's financial crisis.
While option (a) cannot be entirely ruled out, Mr. Obama's appearance on the "Tonight Show with Jay Leno" Thursday elicited more responses along the lines of (c).
True, the show probably will be remembered more for his gaffe about his bowling score and the Special Olympics. (Click here for that controversy.) But most of the segment was devoted to the economy and the outrage over bonuses to AIG personnel.
"Critics will argue that an appearance on a celebrity chat show is not the best place to expound economic ideas; but this appearance fitted in with President Obama's mantra of wanting to take politics outside of Washington," the BBC reported.
"When he was a candidate for president, Barack Obama’s advisers often cautioned him not to be too wonky when he went on television talk shows. He was having none of that on Thursday," wrote New York Times blogger Edward Wyatt.
AIG mess explained
In simple terms, the president explained how AIG put a hedge fund on top of its insurance business and began to insure investments based on risky mortgages.
"When people started going bust on subprime mortgages, you had $30 worth of debt on every dollar worth of mortgage -- and the whole house of cards just started falling down," he said. (For the full transcript, click here.)
Instead of criticizing AIG's decision to issue the bonuses, he raised the larger issue: "They were making a legal calculation, and their legal judgment was not necessarily wrong. But there's a moral and an ethical aspect to this, as well.... I think the most important thing that we can do is make sure that we put in a bunch of financial regulatory mechanisms to prevent companies like an AIG holding the rest of us hostage. Because that's the real problem."
Asked if some people in the scandal should go to jail, Obama didn't demagogue. "Most of the stuff that got us into trouble was perfectly legal," he explained, then made his point about the need for better regulation of the financial sector.
It's clear that the president gets the crisis. He understands what pulled us into this mess. He can engender enormous confidence by explaining to Americans how his programs will pull us out.
Ultimately, though, he will be judged not by his message but on how – and whether – the economy rebounds under his watch.