Two voices have arisen in opposition to the Bush administration’s bailout plan for the credit markets.  William Kristol and Rep. Mike Pence have voiced early opposition to the nearly $1 trillion plan that Congress will hastily address this week.  While both see the need for action, Pence especially argues that the proposal will extend the same bad practices that led to the meltdown in the first place:

“The administration’s request amounts to the largest corporate bailout in American history,” Pence said. “Congress should act, but should act in a way that protects the integrity of our free market and protects the American taxpayer from more debt and higher taxes.”

Pence offered a number of alternatives, from suspending capital gains taxes to passing a comprehensive energy bill to establishing a commission to overhaul entitlement spending, but nothing that would give the markets the financial security Treasury Secretary Henry Paulson and others believe they desperately need.

“Congress must not hastily embrace a cure that may do more harm to our economy than the disease of bad debt,” Pence said.

The Indiana Republican also stokes an ongoing call to overhaul of Fannie Mae and Freddie Mac, the two government-sponsored mortgage giants that act as a backdrop for most Americans’ home loans. The Treasury Department could use Fannie and Freddie as financial vehicles to purchase some of the bad debt before Congress grants it broader authority.

Kristol has the same concerns.  He argues for a different solution, not out of a sense of “ideological purity”, but because government intervention has already proven disastrous in this crisis:

A huge speculative housing bubble has collapsed. We’re going to have a recession. Unemployment will go up. Credit is going to be tighter. The challenge is to contain the damage to a “normal” recession — and to prevent a devastating series of bank runs, a collapse of the credit markets and a full-bore depression.

Everyone seems to agree on the need for a big and comprehensive plan, and that the markets have to have some confidence that help is on the way. Funds need to be supplied, trading markets need to be stabilized, solvent institutions needs to be protected, and insolvent institutions need to be put on the path to a deliberate liquidation or reorganization.

But is the administration’s proposal the right way to do this? It would enable the Treasury, without Congressionally approved guidelines as to pricing or procedure, to purchase hundreds of billions of dollars of financial assets, and hire private firms to manage and sell them, presumably at their discretion There are no provisions for — or even promises of — disclosure, accountability or transparency. Surely Congress can at least ask some hard questions about such an open-ended commitment.

The crux of the skepticism over the plan comes from an absurd protocol at the heart of it.  It makes Henry Paulson a de facto financial czar, in charge of potentially a trillion dollars in taxpayer money with no accountability whatsoever for his actions.  Here’s the relevant proviso in the legislation:

“Decisions by the Secretary pursuant to the authority of this Act are non-reviewable and committed to agency discretion, and may not be reviewed by any court of law or any administrative agency.”

We don’t allow this kind of free agency from elected officials, let alone political appointees.  Not even in his role of Commander-in-Chief does a President have a mandate that is completely unreviewable.  Henry Paulson may or may not be the most brilliant thinker in high finance, but even if he was, why would Americans want to give him literally a carte blanche with the equivalent of one-third of our annual budget?  With no review possible?

It’s absurd, and at its heart, it’s un-American, in the sense that America exists precisely because of our desire to rein in government and make it accountable to the people.  We gave up on the monarchy in 1776.  We certainly didn’t do that to trade in King George for Czar Henry.  Only in a panic, in which Congressional leadership abdicates its role to keep executive power in check, would any American Congress agree to surrender its Constitutional mandate for oversight.  And that panic may be taking place now.

Barack Obama has decided to wait a few days to study the matter before determining whether to offer his support.  His only impulse in opposition thus far has been to demand a partnering stimulus package, in which government would spend even more money as it prepared to buy a trillion dollars of debt.  John McCain seems to be thinking more clearly.  He has called for an oversight board to run the bailout rather than a single appointee, and today expressed his misgivings:

I am greatly concerned that the plan gives a single individual the unprecedented power to spend $1 trillion – trillion – dollars without any meaningful accountability.  Never before in the history of our nation has so much power and money been concentrated in the hands of one person.  This arrangement makes me deeply uncomfortable.  When we are talking about a trillion dollars of taxpayer money “trust me” just isn’t good enough.

We will not solve a problem caused by poor oversight with a plan that has no oversight.  Part of the reason we are facing this crisis is an antiquated regulatory system of uncoordinated agencies that haven’t been doing the job.

I believe we need a high level oversight board to impose accountability and establish concrete criteria for who gets help and who does not.  They must ensure that throughout this crisis, the government is a careful steward of the taxpayer’s dollars.  The oversight board should be bipartisan and have qualified citizens who have no agenda but the protection of taxpayers and the financial markets.  People like: Warren Buffet, who supports my opponent, Governor Romney, who supports me, or Mayor Bloomberg, an independent.

The firms we help need accountability too.  We cannot have taxpayers footing the bill for bloated golden parachutes like we see in the Lehman Brothers bankruptcy, where the top executives are asking for $2.5 billion in bonuses after they ran the company into the ground.  The senior executives of any firm that is bailed out by treasury should not be making more than the highest paid government official.

I would also urge transparency throughout this process.  The American people have the right to know which firms will be helped, what that selection will be based on and how much that help will cost.  The details of the process and the transaction itself should all be made available online for public scrutiny.

We got into this crisis through a curious blend of government intervention and lack of oversight.  Democrats and Republicans both tried manipulating the credit market for political purposes, demanding lower standards for lending while not supervising the accounting practices that resulted.  At first blush, this plan looks like more of the same, only this time we’ll spend massive amounts of taxpayer money directly and have absolutely no oversight on how it will be spent.

Given the government’s blame in creating this crisis, I understand the necessity in the government taking action to defuse it before it creates a global financial meltdown.  However, we need to correct the problems we created in the first place, not by giving $1 trillion to a single person with no accountability whatsoever, but by dismantling the machinery of government interference that gave birth to the credit crisis.  In the short run, we need a lot more accountability in government, not less, in order to ensure that the long-term goal of getting Washington out of private lending policy reaches success.  This plan goes in the wrong direction.