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OpEdNews Op Eds    H2'ed 9/28/08

"Insulating Main Street from Wall Street" Means America's Keys in Wall Street's Pocket

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We all know that insulation cuts both ways: it keeps heat in and cold out (in home insulation), but it also keeps cold in and heat out (an insulated Thermos).  In other words, insulation is a wall, a barrier -- and it’s always non-transparent, keeping something away from something else.


With the modified bailout proposal announced today as “agreed” to by Congressional leaders of both parties, House Majority Leader Nancy Pelosi chillingly emphasized that one of the “achievements” of the modified bailout is that it “insulates Main Street, and everyday Americans, from the crisis [created by] Wall Street.” 


We know for certain who’s going to feel the financial heat: the American taxpayer.  Yet this proposal also leaves the American people out in the cold at the very same time, the accountability and control they get is even less than the ridiculously unaccountable original proposal.


Touted as a “breakthrough” that increases oversight, the accountability to the American people is actually decreased even more under the modified proposal by placing an impenetrable wall of insulation between the American people and Wall Street: the one’s who will really control the bailout’s execution. 


This impenetrable insulation takes the form of a “Financial Oversight Board” (FOB) in the modified bill, which is a three-headed Troika of otherwise independent but Wall Street-friendly federal agencies that will operate like a Board of Directors does over a CEO, with the Secretary of the Treasury acting, in effect, as the CEO, and the FOB, like a Board of Directors, which always sets ultimate policy.


The REDUCED, rather than increased, accountability comes from two main factors.  First, the only control the people had under the original proposal was the hope that the President would fire the Secretary of the Treasury for malfeasance.  Because the unprecedented new Troika is made up of three independent federal agencies, so the President (the only elected person with any possibility of control) has a much harder time impacting them, and has to replace at least two of them instead of one Treasury Secretary.  Canning two of these major business figures in the SEC, Fed, and FDIC would arguably shake up the markets further.  Moreover, it’s questionable indeed for the President to have a “litmus test” on bailout policy for any appointee to an “independent” federal agency that is supposed to be just that – Independent.

As if Congress wants to make absolutely sure that there’s no political accountability to anyone elected by the American people, the modified bailout plan further requires that the President to have “good cause” before firing or replacing any single Troika head on the FOB hydra.  Instead of serving at the pleasure of the President or at will, this good cause requirement would probably be interpreted just like the “business judgment” rule is applied to Boards of Directors in corporations.  


Under normal business law principles, exercising “business judgment” in good faith is a very easy standard to meet, and it by law insulates the Board of Directors from any liability for their decisions, no matter how disastrous the results, if they were made in good faith at the time made.  Thus, if a given plan has, on an overall basis, any argument in favor of it at all, it will likely pass the business judgment rule, courts won’t micro-manage the details, and the President will not have the “good cause’ necessary to fire and replace any of the heads of the Wall Street Troika.  McCain, who says he wants to fire the head of the SEC, would likely be unable to muster the good cause now to be required for such a firing.


Business deregulation has generally gone hand in hand with regulatory agencies being captured by Wall Street interests, so now, in effect, Wall Street decides how much accountability Wall Street will get, thanks to the Troika and “good cause.”


And if, in a fit of conscience, this FOB nevertheless decides to rattle a few cages on Wall Street, the greedy Wall Street pirates will shiver the timbers of the markets and still have various other methods of recourse.  The American people will have no recourse.


But the American people are the ones footing the bill, so they’re thrown a bone in the form of a slight equity stake akin to getting a few lottery tickets on bankrupt companies, and the American people are cut out of the deal, and can’t control what’s going on – even while they are paying for it.


At, the poll today asks: “Has Middle America gained new clout with the fight over a financial bailout plan?”  As of 3:30 pm EST Sunday, already 66% of over 22,000 voters already see through it.  See (right hand column)  But if these votesr saw this article or the provisions of the new bailout plan in their true light, 98% of Americans would recognize not only that they’ve gained no “new clout” in the fight over the bailout plan, but that it’s left them out in the cold even more, holding the bag as usual.


The modified plan’s “Financial Oversight Board” (FOB) is just a newfangled and unprecedented FOB that pretends to add the accountability and transparency the American people require (no American can rationally want UN-accountable government), while actually making the plan even less accountable to Main Street, but much MORE accountable to Wall Street.  Do we really believe that Wall Street, at this juncture especially, can watchdog itself? 


Like Operation Iraqi Liberation (OIL) being changed to Operation Iraqi Freedom (OIF), I predict that if enough Americans check their dictionary for the meaning of FOB, they will change the name of the Troika as well.  At will find FOB defined as “a small pocket just below the waistline in trousers for a watch, keys, change, etc.”  


Indeed, the keys to America’s pocketbooks are being handed to an insulated Troika of Wall Street friendly insiders, who will have dictatorial control over another $700 Billion to go into Wall Street pockets in one way or another, while Wall Street and its regulatory friends purport to watchdog themselves and hold themselves accountable.


Tell everyone you can that We the People do NOT ordain and establish (the introduction to the Constitution) such nonsense like this.  The solution to problems of deregulation that created the Wall Street crisis in the first place is not a deregulated bailout without accountability to the people: the ones who pay for it all, and whose authority to ever punish the offenders is being given away.  This wall of insulation gives American democracy a permanent chill, and puts your keys in Wall Street’s FOB.  

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Paul Lehto practiced law in Washington State for 12 years in business law and consumer fraud, including most recently several years in election law, and is now a clean elections advocate. His forthcoming book is tentatively titled DEFENDING (more...)
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