Thursday, November 13, 2008

Crashing the Crash

via The Daily Beast

"When the bailout bill was first debated, Congress was applauded for promising oversights on its implementation. But The Washington Post reports that "no formal action has been taken to fill the independent oversight posts established by Congress when it approved the bailout to prevent corruption and government waste." And Congress has missed the deadline for its first monitoring report. The Congressional Budget Office, which also has oversight responsibilities, is worried it won't be able to find people with the expertise to carry them out. "It's a mess," said the Treasury Department's inspector general. "I don't think anyone understands right now how we're going to do proper oversight of this thing."

Meanwhile, back at the ranch...

"The supporting role the former Clinton official played in its collapse raises some hard questions about whether he should be the next treasury secretary.

"As the incoming Obama administration prepares to find a way out of our latest economic mess, it is worth recalling the forgotten relationship between the man who seems to be a leading candidate for treasury secretary, Lawrence Summers, and the collapse of Enron, which in many ways presaged our current economic crisis.

"The supporting role that Summers played in Enron, including his reassuring correspondence with Ken Lay and his laissez-faire approach to the California energy crisis of 2000 and 2001, indicates why he may not be suited to steer the nation through the troubled economic waters that lie ahead.

"In his book about Enron, Conspiracy of Fools, Kurt Eichenwald describes Summers’ role in the early stages of the California energy crisis when the state was suddenly faced with power shortages and energy costs that were soaring up to 20 times normal levels. Then-Governor Gray Davis, convinced that Enron and others were manipulating the market, begged the federal government to intervene.

"Before Summers is nominated to head the treasury, he should be asked some basic questions.

"Even as blackouts shut down dialysis machines and traffic lights from Sacramento to San Diego, Summers and the Federal Reserve chairman, Alan Greenspan, decided to take a few moments to teach the California governor a lesson or two about free markets. In an emergency meeting the day after Christmas 2000, Summers and Greenspan, responding to the governor’s complaints about corporate tampering, lectured the governor that price manipulation was only possible because California had improperly regulated its markets. They urged the governor to take it easy on Enron and the other power companies because, in effect, being too critical of them might make them reluctant to do business in California. Summers and Greenspan pressured the governor to remove state caps on consumer rates."

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President Elect Obama's Transition Phase Feedback Site

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