Rupert Cornwell: Obama needs to start governing

You wouldn't have thought so from the matey, almost adoring, treatment of Barack Obama the other night by that tribune of the people Jay Leno, the TV host. But this presidency, still so promising, is at risk of being overwhelmed by the mob.

The rare if not unprecedented appearance by a sitting president on late-night television from Los Angeles had been arranged a while in advance. But its timing was perfect. Back in Washington, the mob, in the form of the people's elected representatives in Congress, was venting its fury on Edward Liddy, the hapless government-appointed chief of AIG, for the bonuses being paid to executives at the company more than any single other responsible for the global financial meltdown, kept alive only by $170bn of taxpayers' money.

Mr Liddy's head remains on his shoulders. But those $165m of bonuses will soon be history, erased by a special law making most of them taxable at 90 per cent. For a moment, a whiff of St Petersburg in October 1917 was in the Washington air. Ordinary Americans of course have every right to be angry. Why should financial types who've made such a mess of things be paid "retention bonuses" to clean up their mess – when the only retention that matters to Joe Public is that of his job? And why should AIG contracts be sacrosanct when GM workers are being told to renegotiate their contracts, or see the US car industry go up in smoke?

Ordinary people have been let down across the board: by the banks who were supposed to look after their money, by a Federal Reserve and government regulatory agencies that were asleep at the wheel, and by politicians who wouldn't face the truth. Who wouldn't be furious?

Every day makes it plainer that this financial and economic debacle marks the end of an American era. The bills finally have come in. No longer can the US assume eternal prosperity to be its birthright. Old ways and old certitudes are dead. Yet many of the players in this drama still don't get it.

The Republicans, who at this moment of national crisis have rejected every overture of bipartisanship from the White House and who still believe a cut in the capital gains tax will solve every problem, don't get it. Amazingly, Wall Street still doesn't get it either. If it did, the bonus system would simply have been scrapped. Instead its denizens seem to think that once the Dow starts climbing, the party can restart. And the nagging fear is that Tim Geithner doesn't get it either.

You have to sympathise with Geithner. No treasury secretary in a century has inherited such problems. None has had to labour in so merciless a spotlight. Incredibly, too, he is having to cope virtually on his own. A dozen senior treasury posts requiring congressional confirmation are vacant, admittedly in part because of even fiercer vetting of candidates after Geithner himself was revealed to have failed to pay some taxes when he worked at the IMF in the 1990s.

But when a president just two months into his term is forced to declare his "complete confidence" in the most important official in his administration – and when the media are in full Watergate-style "who knew what when?" mode over the government's failure to block the AIG bonuses – you know the poor man is on thin ice.

And now the unease is turning towards the President himself. Obama, make no mistake, gets it. He knows America must change its ways, at home and abroad. Yesterday's overture to Iran is of a piece with his determination to see that all Americans have health insurance.

Yet something is missing. Obama, like Geithner, has brains to spare. He understands that today's problems are vast and deep rooted. He says all the right things. In just two months he can boast achievements of great substance. But he still comes across as oddly insubstantial, as if he were still campaigning.

Obama's "Big Bang" approach to governing – that the crisis is an opportunity to press on all the faster with reform of healthcare and education, and with steps to reduce America's dependence on imported oil and dirty domestic coal – in theory makes perfect sense. But even in a president's day there are only 24 hours. In reality, by focusing on everything, he risks appearing to be focusing on nothing. Obama is all grace and intelligence. What's missing is visible muscle, the heft to control the populist tiger.

Contrary to what Republican scaremongering would have one believe, America is not going socialist. The place may be a touch more social democratic these days – but Obama well knows that when the public rage subsides, the same old banks (albeit maybe fewer of them) and basically the same old Wall Street will remain the linchpin of the system. The trick is, as he put it before departing on Wednesday for California and Jay Leno, is to "channel the anger in a constructive way".

For all the unease, no one else is better placed to do so. Obama still has wide popular support. People want him to succeed – George Bush included, as the reviled former president said last week. Inevitably, his approval rating has slipped from the stratospheric levels of inauguration day to a more realistic, albeit comfortable 60 per cent. A few false steps, though, and it could start sliding like the Dow.

Until a few days ago, this was still unequivocally "Bush's crisis". But the AIG affair, when the public finally screamed "enough" at banks and bailouts, is owned by the Obama administration. For Wall Street, the Dow's swoon has already transmuted into "the Obama bear market". If nothing changes, this could soon be "Obama's crisis" in the public mind as well.

Maybe of course things will change. The measures taken – the $800bn stimulus package, the aid for the financial sector and the trillions of dollars being pumped into the economy by the Federal Reserve – are bound to have an impact. Alas Americans, however well disposed to their president, are not patient sorts. The fretting has already started. If a few green shoots don't start appearing, and if the hated banks come begging for another few hundred billion, then the tide of fury could swamp the White House too.