The battle between Wall Street and Main Street over how to rescue our troubled financial system rages on. On Monday, the House rejected a $700 billion bailout plan crafted by the Bush Administration and the leadership of both parties, the Emergency Economic Stabilization Act of 2008.
As champions of transparency and accountability, POGO isn't shedding tears over this development. Any plan that ultimately passes will not be carried out by civil servants alone. Much of the work will be performed by contractors. The plan outlined in the rejected bill would have vested the Treasury Secretary with unprecedented oversight powers, including the power to bypass federal acquisition rules:
The Secretary may waive specific provisions of the Federal Acquisition Regulation upon a determination that urgent and compelling circumstances make compliance with such provisions contrary to the public interest.
This would have enabled the Treasury Secretary to award billions of dollars in sole-source contracts to private asset managers firms and financial consultants, even those with a direct financial interest in the bailout. In addition, the Secretary could waive other FAR provisions that protect taxpayers.
It's encouraging to see news outlets starting to focus on the potential for contracting abuses in the bailout. As POGO Executive Director Danielle Brian explained to Government Executive this week, "The government has not shown much competence in emergency contracting." As two shining examples of this lack of competence, we present 1) Iraq reconstruction and 2) Hurricane Katrina cleanup. On the other hand, the analysts quoted in this Washington Technology article speculate that the bailout will increase pressure on cash-strapped agencies to find ways to reduce contracting risks.
Meanwhile, the Center for Responsive Politics followed the money trail and made an interesting finding regarding the bailout battle. It seems that House members who voted for the bill on Monday have collected about 51 percent more in campaign contributions from the affected industries (finance, insurance and real estate) than those who voted against it. Among Democrats, that discrepancy between bill supporters and opponents is an even more astonishing 88 percent.
-- Neil Gordon