SOC will act as the rational businessperson representing US taxpayer interests, not as a Government-sponsored entity providing “sweetheart” deals in the face of purported conflicts of interest. SOC will negotiate directly with financial institutions and other entities receiving aid to ensure that market terms are secured. This would have prevented the kind of deals the Treasury cut with the first $125 billion of TARP, deals that were completely inadequate from the US taxpayer perspective. Further, SOC will act as an independent arbiter of program proposals, and can drive hard bargains in the face of entrenched interests, e.g., would Treasury Secretary Paulson really let Goldman Sachs’ or Citigroup’s stock price go to zero, even if it is in the best interest of the financial markets and the US taxpayer? The fact that nobody can confidently answer this question is unacceptable.
We, the People, deserve transparency from our Government, our financial institutions, and about the process for restoring the health of our financial sector and the economy. Creation of the SOC is a step in the right direction. This needs to be bolstered by strict enforcement of FAS 157, the “fair value” accounting rule. Most financial institutions have been reluctant to mark hard-to-value assets to market. It is this opacity that has kept a dark cloud over both the stocks of these companies and the financial injections into these institutions. If we cannot trust the financial statements of these firms, how can we possibly quantify the depths of their troubles and understand the magnitude of financial assistance needed? Further, the trillions of off-balance sheet assets that largely remain a mystery to investors need to be brought back on-balance sheet so a proper accounting of financial exposures can be made. Like the avoidance of mark-to-market accounting, off-balance sheet assets reduce transparency and obscure the health of our financial institutions. With tougher accounting rules forcing transparency together with the independent and conflict-free leadership of the SOC, US taxpayers and investors will have a much clearer picture of the health and resources required to repair our financial institutions and our economy. This will avoid squandering funds on short-term, patchwork solutions to problems that require radical thinking and even more radical actions.
We are at a critical moment in our nation’s history. We are all custodians for the next generation, one that will face problems and burdens that the Baby Boomers couldn’t possibly imagine. Staggering deficits. Towering entitlement obligations. Crumbling infrastructure. The stakes are enormous. It is time for visionary leadership and hard decisions. Many will get hurt. The goal is to do the best for the most, to be open and honest about it, and to get on with it. But in the absence of transparency, clarity and integrity, the ability to effect real change will be sharply limited.
