Tuesday, September 30, 2008

How To Make the Bailout Bill (More) Acceptable.

Is the Axis of Arrogance—the bipartisan bunch supporting the bailout bill—plotting to get rich(er) off your $700 billion? Of course they are! That’s why they are so desperate to get the bill enacted, so desperate that they are practicing economic terrorism on nervous Americans, threatening to crash the economy, just to get their way.

For this Axis of Arrogance, some things are worth fighting for. Such as $700 billion, with the promise of plenty more where that came from—that’s worth fighting for. But here’s a way to take away most of their fun: Put into the bailout bill a stipulation that all governmental transactions have to be online, in real time, so that everyone can see what everyone else is doing.

One of the many reasons to oppose the bailout bill is the looming prospect that lobbyists will circle that $700 billion like “birds of prey,” as John McCain so memorably observed. Back rooms in Washington DC aren’t smoke-filled anymore, but the rooms where lobbyists meet are well in the back, out of sight. And you can be sure that every lobbyist in town is waiting to open up a new “practice,” which will consist mostly of figuring out how to help banks sell distressed financial instruments to the government at a higher price than they would otherwise get. (One suggested name for the new entity, by the way, is the Securitized Housing Insurance Trust.)

And of course, Members of Congress, and activist groups such as ACORN, will seek to oversee the process of doling out that $700 billion. That’s right, the same people who brought you Fannie Mae and Freddie Mac—and before that, the Savings & Loan bailout—are looking forward to “serving” the public once again. They just don’t want you to know about it—and they certainly don’t want you to see it.

But there is a solution: full disclosure. As Supreme Court Justice Louis Brandeis observed nearly a century ago, “sunlight is the best disinfectant.” And that has always been true. In the 90s, then-House Speaker Newt Gingrich put actual drafts of legislation online, through the Thomas system. More recently, Sen. Barack Obama has teamed up with conservative Republican Sen. Tom Coburn of Oklahoma to begin making federal spending more transparent. And conservative activist Grover Norquist has teamed up with Ralph Nader to make state government spending fully transparent; already, in nine states, you can go online and see how they are spending your money.

So now, before anybody even thinks about enacting a bailout bill, let’s make it totally transparent. As in totally transparent. That is, put all the distressed financial instruments on the Internet, via eBay—or better yet, some totally open-access system—so that everyone can analyze the documents and make a bid for them. That would set a fair-market price for each of these pieces of paper.

Now Secretary Paulson, of course, has said he wants to pay more than fair-market price for these securities, as a way of paying off his friends. Oops, I meant to say, “injecting liquidity into the system”! Forgive me.

But if the Securitized Housing Insurance Trust, or whatever it’s called, chooses to overpay for an instrument, well, that will all be online, fully visible to one and all. And Presidents and the rest of the political class will be held visibly accountable.

Now let’s add a provision mandating that all lobbying and “consulting” fees be fully disclosed. We might still get a legislative turkey, but at least we’ll know how badly we’re being ripped off. Down to the penny.

Posted on FoxForum this afternoon.

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