Saturday, April 4, 2009

Outrage Story of the Day

My alternative title for this entry was “Meet the New Boss, Same as the Old Boss.” The Washington Post tells us here that the Obama administration has resorted to cleverness and deception to funnel money to financial companies who want the dough but not the restrictions, such as on pay, that Congress has slapped on TARP funds. Ironically, the Obama-ites would thus be taking a page from the playbook of the failing major banks. Remember how these financial institutions created entities that lived off-balance sheet until they got in trouble, at which time the retractable tether cord mysteriously appeared and they got sucked back into the mother ship. Don’t you love U.S. accounting rules?

Obama’s administration apparently has created intermediary vehicles to “wash” the money before it reaches the intended recipients, so they’re not directly getting TARP funds (and so don’t have to abide by TARP rules). If you’re thinking, “Gosh, that sounds an awful lot like money laundering,” you get the gold ring. (See the quote on the article’s second screen.) So what it essentially boils down to is this: the Obama crew has decided to circumvent Congress (the people) at will, to do what it likes to try to rescue the financial industry.

For the record: I’m not a fan of the pay restrictions, though I respect them (in essence, if you’ve screwed up, and you need money from me, then don’t whine about restrictions I impose on you -- consider it incentive not to screw up next time, huh?). I think it’s much smarter for the U.S. to simply gnaw off a chunk of preferred equity in exchange for aid, and not to get into the nitty gritty of pay scales and who gets what bonuses etc.

But what the Obama top brass are doing is troublesome. To simply do an end run around Congress isn’t the answer. If they think banks (and other companies) deserve no-strings, stigma-free cash, they need to make that argument to the people. Obama did the right thing on Guantanamo; it had become a potent and corrosive symbol of America values in decay. But why has his moral center been so badly knocked out of plumb on this banking crisis?