accounting reform

The financial crisis is beyond my ken, I freely admit.  When the complexities grow too much for the layman, though, I find it useful to remind myself of the basic realities of government.

The government is not responsible with your money.

Four years ago, privatization of Social Security was scuttled in large part because Congress thought it unfair to toss the average taxpayer into the volatile marketplace with his/her retirement savings.  Now, the government is forcing us all to participate in the financial markets, but only allowing us to invest in the worst assets.  Just great.

Government solutions tend to create new problems, which demand new government solutions, which create new problems to be solved, etc, ad nauseam (i.e., Government solutions tend to create problems so big that only government can solve them).

And with all this current talk of making the bad actors pay for their sins, you'll notice that no one is talking about changing the government's policies that caused this. It's never the government's fault, apparently. They only create the incentives. And hold a gun to the banks head to comply with them. But they don't actually, you know, sign the mortgage papers, so they're in the clear. They can just point at the bankers and say, "It's the greedy capitalists, man!"

Politicians are bipartisan in only one respect: they all act to maximize their own utility (which only partially intersects with that of the public).

Pelosi screwed up royally.  She is the Democratic Tom DeLay.  Newt Gingrich was an ideologue, but Tom DeLay was simply a partisan, most keenly interested in maximizing his party's political power.  Pelosi cut a deal in which, as far as I can tell, every single Republican in a safe seat had to vote yes so that the Democrats could maximize their no votes.  Given that the Republican caucus is pretty much in open revolt, this was beyond moronic.  She then spent a week openly and repeatedly blaming the Republicans and the Bush administration for the current crisis. 

The way she set things up, it was "Heads I win, tails you lose":  vote for the deal and I'll paint you as heartless reactionaries bailing out your fat cat friends. 

If you're going to do that, you'd better make sure you have some goddamn margin for error in your own party.  She didn't.  Then she got up and delivered yet another speech blaming the Republicans for the bailout deal she was about to pass.

If only to make a point, some mischievous politician should suggest an amendment to any eventual bailout legislation:  In order to prevent public money from being entrusted to an entity which has demonstrated poor fiscal and accounting practices, no bailout funds can be administered by any person or entity whose spending has exceeded revenue in each of the past 5 years.

It would never pass, of course.  But it would be interesting to hear politicians explain why. 

While I find the bailout horrendous on a number of levels, people whose opinions I respect say that it's better than the alternative.  If we have but two bad choices, then we should focus on creating mechanisms to prevent this from happening again. 

For starters, we need accounting reform within the federal government.  If the government is going to take over major industries, businesses and assets, then surely the federal government should be forced to abide by accounting standards and disclosure rules at least as rigorous as those it imposes on business.  Our government should not have less responsibility to us than private business has to private shareholders.

Secondly, we need to begin communicating much more effectively.  The storyline desperately needs to be changed from idiotic "the market failed!" to "a lot of things failed, but failing businesses go away; the government gets bigger."  That's not a narrative shift that happens overnight.  It will take years.  We need to start telling a story - in new ways and through new channels - about the failures of the only monopolist the Left seems to trust: government.

Remember, when Wall Street falls hundreds of billions of dollars short, it is called a "massive crisis".  But when Washington, DC falls hundreds of billions of dollars short, it is called "2008".

UPDATE

Cato @ Liberty has more.  Jim Harper says "no bailout".

As the crush of entitlement obligations worsens, this would be a very valuable message for the Right to begin trumpeting....

[O]riginally, [Fannie Mae] was a government agency endowed with the authority to buy mortgages, in the hope that this would expand the supply of credit to homeowners. It wasn’t until 1968 that Fannie was privatized. (Freddie Mac was created two years later, and was private from the start.) The main reason for the change was surprisingly mundane: accounting. At the time, Lyndon Johnson was concerned about the effect of the Vietnam War on the federal budget. Making Fannie Mae private moved its liabilities off the government’s books, even if, as the recent crisis made clear, the U.S. was still responsible for those debts. It was a bit like what Enron did thirty years later, when it used “special-purpose entities” to move liabilities off its balance sheet.

The S&L bailout.  Enron.  Worldcom.  Arthur Anderson.  The subprime crisis. 

They are drops in the bucket compare to the debt being piled up by the federal government.  And yet, Congress allows the Federal Government to get away with accounting practices that would land a CEO in jail. 

Congress should be forced to abide by the rules that they apply to the accounting industry.  Nothing would tie down the politicians like a bit of accounting sunlight.