Posted on: Wednesday, October 1, 2008
COMMENTARY
How to run a financial rescue the right way
By Paul C. Light
With Congress out of session for Rosh Hashanah, lawmakers have two days to think about how to fine- tune the Emergency Economic Stabilization Act for passage. If opponents of the $700 billion bailout are serious about greater administrative accountability, negotiators gave them plenty of room for improvement. So much time was spent hammering out the program that the bureaucratic details have been left mostly to chance.
These details are critical to the ultimate success of any bailout. Time has a way of eroding good intentions, especially in an environment characterized by high expectations, intense scrutiny and incessant lobbying. Treasury secretaries will come and go, but the bailout bureaucracy will endure. As currently designed, it simply does not have the independence to withstand the inevitable firestorm of political pressure that will surround it.
Here are 10 ideas Congress should consider to start building toward a more accountable bureaucracy:
Set a timetable for converting the Office of Financial Stability into an independent agency. The Treasury Department can incubate the office for a time, but it does not have the institutional memory to manage and oversee this kind of high-transaction operation. Unless Congress breaks it free, the Office of Financial Stability will be buried under six layers of political appointees, hardly a harbinger of speed and accountability.
Raise the agency to the same perch as other high-impact government organizations such as the Social Security Administration and Environmental Protection Agency. As proposed, the Office of Financial Stability in the Treasury Department would rank below them.
Give the agency head a seven-year term and allow removal only for cause. The term of office would create continuity across administrations, while the removal restriction would provide at least some protection from political interference. The agency head would be able to say no to risky investments that Congress or the president might favor. Given recent efforts to intimidate other inspectors general, Congress might consider giving the special inspector general proposed under the plan the same insulation.
Ensure that the agency's director would be selected solely for expertise. Lawmakers could do this easily by copying Congress' mechanism for appointing the U.S. comptroller general. Under these guidelines, Congress appoints a selection panel that forwards at least three potential nominees to the president. The president retains the constitutional authority to ignore the list but has never done so.
Limit the number of presidential appointees at the top of the agency. Fewer appointees will lead to less turnover. Congress could also create statutory qualification statements for each position to make sure the jobs are real, not just plums for campaign aides with no place to go.
The Senate could amend its rules to require a confirmation vote within 60 days of receiving a presidential nomination. It could also work with the next president to streamline the appointments process to eliminate needless paperwork and delay.
Keep the agency as flat as possible by requiring a rationale for each management layer. The head of the Office of Financial Stability should be able to reach the front lines as quickly as possible, rather than playing a version of the childhood game of "telephone" that diffuses accountability in so many federal agencies.
Give the agency authority to create a pay system that rewards employees for measurable performance, not time on the job. Without fast-track waivers from the antiquated civil service pay system, it is hard to imagine that the agency would attract the best and brightest to its ranks.
Create a completely transparent contracting process with enough acquisition officers to run it. The financial crisis cannot become yet another excuse for fuzzy contracts and opaque reporting. Congress should require contractors to supply hard data on the salaries they pay their employees and the performance measures they would use to ensure a fair return on investment.
Seal the agency off from even the hint of political interference. Congress could easily prohibit all outside lobbying and gifts while requiring full financial disclosure from every person in the organization as well as every analyst under contract.
By adding these kinds of details to the bailout, opponents would give themselves at least some comfort in voting for passage. They would also improve the odds that a bailout would succeed. Wall Street would not be in trouble if it had paid attention to the bureaucratic details. Congress should not make the same mistake.
Paul C. Light is a professor at New York University's Robert F. Wagner School of Public Service. He wrote this commentary for The Washington Post.
