Since the beginning of the financial crisis, the US Government has established policy on a case-by-base basis. Bear, Stearns was forced into the arms of JP Morgan Chase. AIG was bailed out not once, but twice. Lehman Brothers was allowed to fail, while Citigroup has been backstopped using the Treasury’s balance sheet. Worse yet, those providing the funds to implement the Treasury’s policy decisions, the US taxpayers, have largely been kept in the dark as to “why.” Why were certain firms bailed out while others were allowed to fail? Why hasn’t transparency in financial reporting been mandated as part of the myriad bailout programs? Why don’t we know how much money we can expect to commit to an institution or the programs overall? Why are decisions being promulgated by those in highly conflicted positions, raising suspicion as to the purity of their motives? Each of these questions raises a more important issue: Which is the best organization to deal with the financial crisis, to both develop and implement policy? The answer: it does not yet exist.

We, the People, are the owners of the US Treasury, the Federal Reserve, the Federal Deposit Insurance Corporation (FDIC) and represent the “full faith and credit of the US Government.” Therefore, solutions to the financial crisis that use our money should benefit us, and reflect a risk-adjusted market rate of return for the capital used. The measure should be what a rational, arms-length investor would demand for scarce capital in a time of crisis, not what Treasury Secretary Paulson together with CEO of the bailed out institution deem appropriate. The interests of the US taxpayer need to be represented in an independent manner, free of conflict. The US taxpayer, the Treasury, the Federal Reserve and the FDIC, politics aside, have perfectly aligned motives. In order to de-politicize policy-making and negotiations around the bailout and financial sector reform, I propose the creation of an independent entity called the Stabilization Oversight Council (SOC). The SOC will be accountable to Congress and the US taxpayer, and will be staffed by market practitioners, economists and policy-makers. It will be responsible for developing policy and implementing decisions to address the crisis and stabilize the economy, and will incorporate input from the Treasury, the Federal Reserve, the FDIC and the White House. However, it will neither seek nor require consensus. Mindful of the weight bureaucracy placed on the Reconstruction Finance Corporation in the 1930s, the SOC will be designed to incorporate the best ideas from the brightest thinkers without suffering from decision paralysis. Stronger than the General Accounting Office, more powerful than the Inspector General, but with clear oversight to ensure it remains true to its mission.

We, the People, should benefit from the monies spent to reclaim the US financial sector.