Like everyone else I’ve been following the crisis on wall street and the proposed government bailout. Just like the rest of the American populace (excepting a few experts) I lack the ability to really evaluate the need for or the sufficiency of the proposed bailout and I worry about jumping to give a broad grant of authority to a few members of the executive branch in the midst of a panic. However, just because a proposal has risks doesn’t mean it isn’t the best option. During times of war the executive branch, and military generals in particular, are given the awesome power to choose who lives and who dies but despite the risks and temptations this creates we don’t believe a congressional committee ought to second guess those choices. True, this is not a war but the same observation applies: just because concentrated power poses risks doesn’t mean it’s not the best overall bet.

I would like to believe in this case oversight by some board of experts, e.g., the federal reserve board, would be possible and beneficial but this might not be practical. However, the idea floating around that congress should provide direct oversight scares me. Obviously, congress should follow the actions taken during the bailout and intervene legislatively if it discovers any abuses but, even if constitutional¹, giving a congressional committee the power to review bailout decisions would be a bad idea. Not only do the congressmen involved lack the expertise to make truly informed decisions but they’ve already demonstrated their willingness to put the rhetoric of getting even above the interests of the country. Senator McCain has even done this in the name of putting America First, though Obama and the democrats in the senate aren’t any better.

Rather than focusing on fixing the financial meltdown from the news I’ve seen congressmen are getting caught up in making sure that CEOs are denied their golden parachutes or demanding that we bail out homeowners as well as the ‘fat cats’ on wall street. Now one might think this rescue package is unjustified or unnecessary but the only reason to pursue the bailout is to prevent the economic instability from spreading to the larger economy. The worry is that without government intervention confidence in financial instruments will collapse thus denying individuals and businesses the credit they need to drive the economy. If you don’t think the problems in the financial sector threaten the general economy then you shouldn’t supporting any bailout at all. Unlike the collapse of the financial sector there is no reason I’ve heard to believe that not bailing out homeowners would cause a general economic collapse. Maybe as a matter of policy the government ought to be helping these troubled homeowners more but that’s a different issue and should be carefully considered not allowed to interfere with an emergency bailout.

The obsession with golden parachutes is even worse. One can argue all day about whether it is just for CEOs to receive gigantic compensation packages but the truth is that the cost of CEO compensation at financial institutions is a minuscule percentage of the 700 billion dollars proposed bailout. Rather than focusing on this insignificant cost our representatives could be doing more to save us money by focusing on the details of the actual bailout. Moreover, I worry that some kind of golden parachute poison pill in this bailout would create an incentive for CEOs to avoid taking part even if it is in their companies best interest. Besides, I don’t see why the fact that these CEOs miscalculated means they shouldn’t be compensated at the rate they negotiated. We don’t think basketball players who don’t perform as well as expected or get injured making a stupid play ought to return the money from their contracts why is it any different for CEOs? This isn’t to say there aren’t general reforms that should be taken about CEO pay in general, e.g., giving stockholders greater control over it, but it is to say that congress should be more concerned with saving the US economy rather than making sure everyone suffers.