Needlenose

While every talking head from Capitol Hill to the late night talk show hosts are focussed on how the corruptly crafted and rushed-through bailout legislation led to the infamous AIG executive incompetence bonuses, the real problem is far more insidious – nothing precludes the TARP recipient firms from using our cash to lobby for favorable legislation – which they have apparently taken to doing with gusto.

I’ve never really bought the argument that corporate lobbying is a form of ‘free speech.’  However, getting that banned is a change I doubt I’ll see in my lifetime.  Still, even the stupidest Federal Judge should be able to see how dangerous it is to allow a private firm to ‘recycle’ tax dollars into lobbying efforts to craft favorable legislation for the recipient.    It’s the type of feedback loop that distorts the market and creates institutional ‘winners and losers.’

• In any governmental bailout of a private firm, we need to insist on the following basic principles:
• The government holds an initial majority stake in the firm
• The goals of the investment and required restructuring and changes are clearly defined and milestones established
• The public stake is reduced in step with the achievement of the milestones
• The firm is barred from any and all political lobbying efforts while the government investment remains.

For the period of time in which the government is a large stakeholder in a private firm, the organization becomes, to some extent, a quasi-governmental organization.  It would be like having the US Post Office spend hundreds of thousands of dollars to lobby Congress to expand their budget!!