Other Courses to Consider on the Bailout

Thoughts on the Big Bailout Bust:
The $700 Billion bailout may have lost in the House of Representatives, but the problem remains and will grow worse by the day. We are in a financial mess, caused by many things, but ultimately the responsibility of the politicians we elect to office. They created the rules and provided the oversight which failed, and both parties share a hand in this. None of us are going to enjoy the next year without some proper actions taken, so the pressure will remain on Congress and the Administration to act, even though their creativity seems quite limited as you might expect for not very creative people.

Amazingly, the first draft of the Paulson Plan was simply this: “Give me $700 Billion, with complete autonomy and authority, no oversight, and no possibility of future recriminations, and I will solve your problem. If you do not do this, the financial system will melt down, millions will lose their jobs, the world will plunge into an economic depression of indeterminate length, and the President and I will say I told you so.” They already did about the same thing on the War in Iraq, and they seem surprised that it was rejected the second time they dragged the same strategy out.

Ross Perot Has Another Plan:
I sent you this web site once before, but I am sending it again. http://perotcharts.com/. Along with economist Pat Choate, they have put together a fairly straightforward plan for this crisis that makes a great deal more sense that what we have seen so far coming out of Congress or the Administration. If you think this makes sense, I urge you to send this to everyone you know. We are working against time on this crisis at the moment, and Perot and Choate demonstrate that there is some creativity around – it just isn’t among the characters the characters in Washington or New York.

The Terrible Problem of Distrust:
The huge $700 Billion dollar bailout failed precisely because of the well earned absence of trust for office holders. The American public simply do not trust those in office in Washington, D.C., or those who run the huge financial institutions and give themselves tens of millions of dollars for failing! Why should any of us trust these people when the only thing we can trust is that they will rip the taxpayer off every chance they can get for their own aggrandizement? If we trusted them, we would be the fools.

Citizen distrust is the consequence of the repeated misbehaviors of those in politics in America for a long time. It did not happen overnight and the misbehavior extends to the office holders in both political parties, and among the Administration. The distrust is present in the absolutely dismal numbers that reflect how Congress and the President are viewed by Americans:

1. 79 percent of Americans think the Country is going in the wrong track!
2. 67 percent disapprove of the job Bush is doing as President.
3. 75 percent disapprove of the job Congress is doing.

Of course, the office holders in Washington, DC seem perfectly capable of arguing that these numbers apply to everyone but themselves. That is an aspect of their behavior that makes us trust them even less. Everything they say is calculated for its effect, not its candor or truthfulness, so why would we trust any of them?

This same lack of trust for our decision makers permeates the rest of the world as well. The polls abroad show overwhelming support for Barack Obama for President. Why? The Bush Administration has all but used up all of the accumulated goodwill that people around the world have had for the United States of America and its government. Barack Obama, whose color most of the rest of the world does not care about, is clearly NOT George Bush or John McCain. Today, nearly half of all the citizens of 23 countries survey by the BBC say that the United States is a negative influence in the world, and that is a six point improvement over the year before.

Dealing with the Problem of Distrust with the Bailout:
Congress and the President can have their bailout authority, but they have to confront the distrust directly – not stay in the “denial” that shapes their thinking. Americans do not trust the Department of the Treasury to hand out this huge amount of money fairly, and they do not trust Congress to provide proper oversight. We have all become use to the enormous fiscal scandals that surface well after the money is gone – in Iraq, Afghanistan, tax loop holes, and every other government giveaway to private interests. Again, we have no real reason to trust any of these people. They have earned our distrust a hundred times over!

But the financial problem remains. We certainly need the government to step in, but it cannot do that unless we trust the process established for using the taxpayers’ money. We have an unprecedented problem, of enormous scope, in a period of rampant and well earned distrust. What to do?

One solution, not part of the Perot proposal (which generally makes good sense to me), is to establish an Independent Oversight Board with extraordinary authority, a full and well funded professional staff, and composed of people selected for their knowledge, true independence, and trustworthiness. You see, we Americans really do still trust many people; just not the ones with authority in Washington, DC or Wall Street.

The authority issue is easy. Provide the Commission the right to review and audit every transaction of the Department of the Treasury, making the deliberate withholding of information a criminal offense, and granting the Commission, under the Attorney General’s Office, the right to institute criminal proceedings against people who violate the law, falsify documents or information, or lie under oath, after a subpoena, to the Commission. Require the Commission to provide full and complete transparency with monthly reports – to the Administration, Congress and the American People-- for the first year during the most intense part of the crisis. Give the Commission the role of approving the rules of process by which these financial transactions are decided and undertaken.

It costs money to spend $700 Billion, or even much less than that, and auditing the process is expensive. This Commission will need a sizeable staff of accountants and lawyers, serving the interests of the Commission and taxpayers.

The Commission would report to the Administration through the President, and to Congress through the senior leaders in both parties. The Commission would be housed directly in the Department of the Treasury where most of its work would be done, but its prosecutorial function would be in the Department of Justice, reporting to the Attorney General and using all of the investigatorial powers of that office.

The true independence of the commission, however, is a product of the trustworthy character of the Commissioners themselves. The Chairman should be a person not affiliated with either political party. A Bill Gates comes immediately to mind, or perhaps Ross Perot, although he is getting on in age (that is anyone older than me, since I turn 67 on Thursday).


There should be four other members, none of them current office holders, with two Democrats and two Republicans. I would, however, force the nominees of either party to be elected by a majority of the members of both parties in Congress. That would eliminate the intense partisanship that characterizes so many processes in Washington, DC. Former Senator George Mitchell is a Democrat who fits the requirements perfectly, or perhaps former Secretary of State James Baker for the Republicans.

The crisis that we have created is an international crisis that threatens to undermine the economies of the rest of the world. Moreover, a part of the proposal involves buying the failed securities from foreign banks as well as domestic ones, since most of the large banks today are really international banks. Given the lack of trust in the rest of the world for the United States and its decisions, I would invite two international figures who are above reproach to sit as ex officio, non voting members of the Commission. However, I would require these members to issue a separate, periodic international report to comment both on the process and the outcomes of the purchases of securities.

Basically, this type of structure is necessary precisely because we do not trust those in office to execute this process fairly and without unfair influence from lobbyists and other sources. If the bailout is the proper way to proceed, it cannot be accomplished without a process that removes or substantially lessens our distrust. By bringing in international members, we begin the process of restoring somewhat our international standing among the other nations. It also helps us establish and environment in which we can get cooperation on this issue from the rest of the world.

Restoring Trust in Office Holders and Government:
I have not detailed here all of the ways that the politicians and office holders in contemporary America have earned our distrust. We have faced such periods in the past in our history, and we have largely overcome the influences that were undermining the operation of our democracy – huge private monopolies that used economic power to rip off the consumer, with the help of politicians, political machines that used the labor of public employees to guarantee their unfettered access to our money, laws that prohibited women and African Americans to vote, etc.
Today, we are faced with the ugly and venal manipulation of our politics with interests who buy their way into the taxpayer’s Treasury through the funding of the campaigns of incumbents of both parties. This is a topic for another day, however.

The problem, of course, is that the things which might restore a higher level of trust in office holders are things that run directly counter to the self-interest of office holders who consistently seek to eliminate competition and to insure that they can stay in office, unchallenged, for as long as they like. That is why campaign funding reform never goes anywhere serious!

The Presidential Election in the Midst of Crisis:
This crisis obviously works to the advantage of Senator Barack Obama, and the polls show it. In the past two weeks, he has gone from an average three point deficit to a five to seven point lead among the major national polls. This is partially due to the financial crisis, which is obviously somewhat more a Republican problem than a Democratic one, and it also due to the growing crisis of confidence around McCain’s Vice Presidential nominee, Gov. Sarah Palin.

When the national media starts to call for her removal for lacking competence, you know that she is in trouble in a way that cannot be properly defended by her Republican proponents. The collective judgment is being rendered among opinion leaders in the United States – she is simply not competent to serve as Vice President – and that judgment will become more widespread and deeper as the perception finds its way into the public consciousness. John McCain’s rash decision is being exploited as an example of his poor temperament and judgment, and he is injured by Palin and will, fortunately for Obama, not admit it.

The Republican strategists thought that they could “hide and train” her sufficiently to get through the short election season that remains after the conventions. They were wrong; but this only adds one more thing to the long list of things about which they have been wrong over the past eight years.

The Presidential election has tipped sharply in Obama’s favor in the past two weeks, and he is much more likely to be elected President today that a short time ago. He might even win by a comfortable margin. That has become more likely than his losing at this point. He will have to overcome the prejudice against his race to win; just as John Kennedy overcame the prejudice against his Catholicism to win in 1960. In my mind, the single most desirable outcome of his success will be the removal of the 3000 to 4000 Republican appointees that operate within the various administrative agencies. We should be able to return to a system where a person’s religious conviction or lack therein is no longer the single most important criteria in their selection to high office.

Just my Opinion

Gordon Black