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A lot of the time, especially in political behaviour, people are likely to ignore the flaws of a leader or in some cases to somehow spin some bizarre positive angle.

For example, corruption of public finance being spun as "it is good because it shows how entrepreneurial the person is".

Even if not to that extent, this is an effect that is seen a lot, a strange kind of defence.

While many terms come to mind, rose tinted glasses, excusing, shifting the burden, none of these exactly describe the psychological phenomenon here.

What is the phenomenon called?

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Confirmation bias is certainly at play here, but I'd narrow that down a bit. It doesn't have a Wikipedia page (yet) but Dan Kahan has been focusing on a variation of motivated reason he calls "Identity-protective cognition". (See Misconceptions, Misinformation, and the Logic of Identity-protective Cognition for a full discussion.)

Confirmation bias can creep in under many circumstances, but we have an especially strong motivation (very often non-conscious) to promote arguments which align with our own self-identity. The person making the kind of claim you're pointing to probably either feels quite strongly about the issue (a economic libertarian discussing the primacy of market-oriented policies, for example) or the person making the claim (a "tribal" leader, perhaps).

An earlier and more limited aspect of this is the Asch effect. As the wikipedia page on argument from authority notes —

In repeated and modified instances of the Asch conformity experiments, it was found that high-status individuals create a stronger likelihood of a subject agreeing with an obviously false conclusion, despite the subject normally being able to clearly see that the answer was incorrect.

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    $\begingroup$ Actually "identity protective cognition" is mentioned on en.wikipedia.org/wiki/Cultural_cognition and has its critics scholar.princeton.edu/sites/default/files/slinden/files/sc.pdf $\endgroup$ – Fizz Apr 3 at 21:15
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    $\begingroup$ Thanks for the link. I think van der Linden's critique is a good one, although it seems to me that it is thoughtfully directed at the "cultural" part of the theory. He actually says «Moreover, although "identity-protective" cognition is certainly a real process…». I've never liked how Kahan uses both terms; now I'm going to have to go back and re-read his papers to see if and how he differentiates them. $\endgroup$ – MrRedwood Apr 4 at 3:37
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It's definitely a form of confirmation bias "the tendency to search for, interpret, favor, and recall information in a way that confirms one's preexisting beliefs or hypotheses". But this is a fairly broad category of cognitive biases.

And in this case it is probably motivated rather than unmotivated confirmation bias. The somewhat obvious distinction being:

I also make a distinction between what might be called motivated and unmotivated forms of confirmation bias. People may treat evidence in a biased way when they are motivated by the desire to defend beliefs that they wish to maintain. (As already noted, this is not to suggest intentional mistreatment of evidence; one may be selective in seeking or interpreting evidence that pertains to a belief without being deliberately so, or even necessarily being aware of the selectivity.) But people also may proceed in a biased fashion even in the testing of hypotheses or claims in which they have no material stake or obvious personal interest. The former case is easier to understand in commonsense terms than the latter because one can appreciate the tendency to treat evidence selectively when a valued belief is at risk. But it is less apparent why people should be partial in their uses of evidence when they are indifferent to the answer to a question in hand. An adequate account of the confirmation bias must encompass both cases because the existence of each is well documented.

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