Thursday, November 13, 2008

The 700 billion dollar question

Some people think the bailout is a great idea. Some people think it's a terrible idea. Some people think it's a pretty bad idea but it still had to happen. But regardless of your view, I think we can all agree if the government is going to pump $700B into businesses, we'd like to know where that money is going.

Unfortunately, as the Washington Post writes, we might not find out until it's all gone. Though the Treasury has already committed $290B,
no formal action has been taken to fill the independent oversight posts established by Congress when it approved the bailout to prevent corruption and government waste. Nor has the first monitoring report required by lawmakers been completed, though the initial deadline has passed.
That doesn't sound like good news to me. As if that's not bad enough, there is mounting evidence that a lot of this money isn't being used the way it was intended. For example, the New York Times reported that JPMorgan Chase (boy, these post-merger names are getting long!) admitted on an internal conference call that they do not intend to use the bailout cash to begin lending money, but instead will use it to shore up their balance sheet.

I'm no expert, so I honestly can't say whether or not this is the right move for Chase. But I am ready to take a stand and say that when you receive billions of dollars from the government, you should be forced to explain openly and transparently where that money is going. I understand that these companies need to continue paying big bonuses in order to maintain an incentive structure, but if the government is going to fund it to the tune of $70B, there should be some transparency to it.

We can look at this as a key opportunity for Obama. From a logistical point of view, it should be fairly simple to create a web interface with information about the bailout, so it could be a great early victory for Obama's transparency policy. Of course, that's assumming that there is any money left by the time Obama takes office!

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