Clean & Quick

US Treasury Secretary Henry Paulson is urging a "clean and quick" approval to the Bush administration's plan to spend an additional $700 billion to clean up the current financial crisis.

There are so many things wrong with this call to action. Let me list my top three objections.

1. It seems that accountability is good for the little guy, but our leadership doesn't want to be held to the same standard. Who here remembers just a few short years ago when the GOP leadership, with the knee-knocking, hand-trembling, invertebrate Democratic party's assistance, pushed through changes to the personal bankruptcy laws to make it significantly more difficult for individuals and small businesses to wipe their financial slate clean when they made poor decisions that led to their liabilities exceeding their assets? One of the key points made during this debate was that it hurt others to just skip out on your obligations, so even though it might be painful and take some time, the expectation was that folks wouldn't be absolved of their debts, but would instead be made to slog along, take some financial counseling, and dedicate a portion of their future revenue to paying off past obligations. Sure, it would mean less disposable income for Joe and Sue Sixpack, but they got themselves into this mess, and it was up to them to get themselves out. The government isn't there to fix people's bad decisioning.

2. Bailouts of this nature are not guaranteed to succeed. The Chrysler bailout of the 1970s is heralded as an example of the government stepping in and lending a hand temporarily, with the thesis being that saving Chrysler saved the US automotive industry, which in turn saved the economy and thousands of job, and since Chrysler repaid the loans, it's a win-win situation. As a temporary solution, that might be true. But examine the root causes that made Chrysler shit the bed in the first place. They were producing large, poor quality automobiles with lousy gas mileage during an energy crisis where people lined up on alternate days for the privilege of filling their tanks. Chrysler had a poor business model, with ho-hum engineering and labor strife that resulted in give-aways to the labor unions in the areas of health plans, staffing models, seniority, and retirement. The lifeline thrown to Chrysler allowed them to shake up their engineering to launch the highly-successful minivan, and Lee Iacocca became the poster child for the modern, get-it-done CEO. But look at the American auto industry today. See anything familiar? It got in deep trouble because it was producing high-margin SUVs instead of envisioning a future of rising gas prices with an associated need for smaller, more efficient models, including hybrids, electric vehicles, natural gas propulsion systems, and alternative energy solutions. They're hemorrhaging jobs and market share, sinking under the weight of retirement and health care costs, and ceding the cars of tomorrow to the Japanese. Perhaps if Chrysler had been allowed to fail, it would have served as a wake-up call to the rest of the industry, and sweeping changes then could have positioned America as a world leader today, instead of a steaming pile of dysfunction struggling to maintain relevance.

3. Anytime someone puts on the pressure to do something quickly, we've been told, it's time to take a step back and start asking some questions. Every advice column on how to buy a new or used car tells you this. After the remnants of Hurricane Ike caused extreme wind damage here in central Ohio, the newspapers, television reports, and radio commentary listed all the right things to do when selecting a contractor to make sure you didn't get ripped off, and the consensus view was to shop around, don't succumb to high-pressure tactics, and use a reputable firm with references that would demonstrate a history of quality workmanship. If this approach is good enough for our auto and home repairs, why should we deviate when trying to fix the problems with our financial infrastructure? Is the situation really more treacherous and potentially disastrous than we're being told, and if so, why should we trust these guys to provide the solution?

Here's my idea: Make the financial services industry endure the same types of aggressive debt resolution processes that the rest of us do. CEOs, CFOs, and corporate boards should receive the regulatory equivalent of collection agency calls during dinner hour, hounding them to make good on their obligations. Set a fair percentage of EBIT (Earnings Before Interest & Taxes) that is dedicated exclusively to paying down their corporate debt. No bonuses or stock options for senior management or board members until the debt is repaid - it's not their money now, it's ours. And finally, if you've received help as part of this $700 billion bailout, you're a public debtor - your cash flow, income, and expenses are available for scrutiny, and if you make any decisions that are not in the best interest of paying down your debt, you're on probation. If you violate your probation, you're out. Period. No golden parachute. No graceful exit. If you can't make good decisions with government regulators and the general public looking over your shoulder, let's face it - you're not cut out for this kind of work.