New Era of Responsibility? President Obama’s Bank Bailout Transparency Efforts

March 2009

IN THIS ISSUE

— Change We Can Believe In? Promised Steps to Police Bailout Funds May Fall Short
— Words and Deeds: What Obama Has and Hasn’t Done Thus Far on Transparency
— In the next issue

GREETINGS!

Welcome to the March 2009 edition of our newsletter! In this issue, we’ll look at how the Obama administration is attempting to change the bank bailout program’s level of transparency — and analyze whether it can get the results it has promised.

CHANGE WE CAN BELIEVE IN? PROMISED STEPS TO POLICE BAILOUT FUNDS MAY FALL SHORT

President Barack Obama swept into the White House on a platform promising change, and his desire to usher in that change certainly seems sincere. Yet, like most presidents new to the office, there may be disconnect between his goals and the immediately achievable reality. as President-Elect, Obama told ABC’s This Week about the remaining $350 billion in bank bailout funds, “We can regain the confidence of both Congress and the American people that this is not just money that is being given to banks without any strings attached and nobody knows what happens, but rather that it is targeted very specifically at getting credit flowing again to businesses and families.” To restore that confidence, one measure the Obama administration enacted was a cap on pay of certain executives at banks that received bailout funds. Yet some of the broader oversight measures meant to instill confidence have met strong resistance.

One month before Obama took office, the Government Accountability Office – Congress’ investigative agency — issued a report criticizing the Bush Treasury department’s initial handling of the bailout funds with respect to publicly stating how the monies were spent. “Specifically, Treasury should work with the bank regulators to establish a systematic means of monitoring and reporting on whether financial institutions’ activities are consistent with the purposes of CPP [capital purchase program] and help ensure an appropriate level of accountability and transparency.”

Thus far, non-profit watchdogs have stepped in to fill the void, such as our friends at the Sunlight Foundation. As Ellen Miller noted last November, This is a real opportunity for the Obama team. Make reporting on the bailout a model of the transparent government that they have so strongly advocated. Daily reporting, online in usable data formats would be a good place to start.”

WORDS AND DEEDS: WHAT OBAMA HAS AND HASN’T DONE THUS FAR ON TRANSPARENCY

While instituting executive compensation caps on bailout recipients won some headlines and channeled populist anger into goodwill, much more will need to be done to make the bailout process a transparent one. While new Treasury Secretary Timothy Geithner promised in his February 10 statement introducing the Financial Stability plan that bailout recipients and the rules that govern them will be tracked on www.financialstability.gov, as of this writing the site is “coming soon.”

Yes, initiatives take time, but the web whiz kids in the incoming Obama administration made www.change.gov a reality in record time, only one week after the election results were finalized, and shepherded the stimulus bill through a friendly but skeptical Congress in a matter of weeks. We hope it’s not a matter of motivation, or backroom dissent from the special interests that helped create the “financial weapons of mass destruction” that helped get us into this mess. As President Obama said in his inaugural address, it’s time to roll up our sleeves and get to work. Let’s hope his financial watchdogs got the message.

IN THE NEXT ISSUE

In the April issue, we would normally talk about taxes. But that subject, frankly, is too morose for the welcoming of spring, so instead we’ll look at the benefits of screening educators at all levels before they are trusted with the responsibility of shaping young minds — and what can go wrong when thorough due diligence is not done before such hires are made.