These funds… they’re managed by professionals who know how to do this for a living.
–Treasury Secretary Tim Geithner
explaining the new financial rescue package

According to the General Social Survey, Americans’ trust in their institutions–from medicine to organized religion to, unsurprisingly, banks and financial institutions–is at an all-time low. In fact, the military is now the only institution that a majority of Americans have a “great deal” of confidence in.

It’s hard to be heartened by these data (indeed, it’s uncomfortably reminiscent of a failing democracy on the eve of a coup), but the distrust is entirely rational. In the past decade Americans have witnessed the broad failure of nearly every important institution in their lives: from church sex scandals to the influence-peddling of Big Pharma and profit-driven cruelty of the medical-industrial complex to an economic crisis that has revealed the Masters of the Universe who ran finance to be craven, corrupt and clueless.

President Obama’s central campaign promise was to restore the basic sense of trust that has so thoroughly dissipated: a crusade of hope against cynicism. His inaugural call for a New Era of Responsibility seemed to signal a recognition that something was truly rotten at the core of our civic life. But if his election granted a momentary reprieve, the old cynicism threatens a comeback.

The outrage over the AIG bonuses occasioned a great deal of commentary about a resurgent populism, often in cluck-clucking tones of disapproval. But the rage, frustration and visceral sense of injustice associated with the bailouts are only part of the story. There’s also the sense that an implicit social contract–by which we assign complicated technical matters to a class of talented experts and in return they figure things out–has been torn to bits.

Remarkably, the small class of (mostly) men running these failed financial institutions seem just as aggrieved. Instead of reacting to their failure with shame or apologies, many exude distrust of and contempt for the great unwashed who don’t understand their brilliance.

As the Wall Street Journal recently reported, the AIG bonus backlash precipitated its own outrage on Wall Street. When the White House reached out to bankers to build support for its rescue plan, bankers took the calls as an opportunity to turn “the conversations into complaints about the anti-bonus crusade consuming Capitol Hill.” Some, the paper reported, “have begun ‘slow-walking’ the information previously sought by Treasury for stress-testing financial institutions…. The banks’ message: If you want our help to get credit flowing again to consumers and businesses, stop the rush to penalize our bonuses.”

This is the fundamental dysfunction that Obama has inherited: the financial elites are ideologically bankrupt, intellectually discredited and morally debased. They have no reputational capital and inspire no confidence. And yet, just as the deftly named “legacy assets” continue to pollute the balance sheets of the major financial institutions, so too do these legacy elites continue to lurk on one side of the balance sheet of democracy. In other words, even if they aren’t worth listening to, they still wield power. They can still bring the whole thing down.

Which is why the White House has softened its tone toward Wall Street of late. The president warned in the opening remarks at a recent press conference that we “cannot afford to demonize every investor or entrepreneur who seeks to make a profit” (a straw man to be sure) while Larry Summers gave a private White House briefing to 100 finance executives in town for a $5,000-a-head conference on the future of finance. It’s even tempting to construe the latest iteration of the financial rescue as little more than a massive bribe: paying off the banks who hold the power to torpedo the economy and the president’s entire agenda.

But the money isn’t enough. The financial elites want public deference as well. So the White House finds itself attempting to squeeze into a vanishingly small political space between a restive, cynical, frustrated populace and a class of unapologetic, entitled (they believe) and potentially destructive elites. “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 then enjoy all the benefits that they enjoyed before the crisis happened,” Obama told 60 Minutes. “You get a sense that, in some institutions that has not sunk in…. 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 want to cut off our nose to spite our face.”

Increasingly it sounds as if the president is playing referee in a dispute between the elites and the people. I’d venture most Americans would prefer a teammate.