The Real Problem with the Bailouts

In a New York Times report about the ongoing inquiry into the New York State pension fund, what’s been bothering me about the federal bailout money finally became clear. The state pension fund contains $122 billion, and the investigation focuses on the use of one of the world’s largest pools of assets by pension fund officials to reward friends, pay back political favors, and reap millions of dollars in cash rewards for themselves. Simply put, when there’s that much money involved, people in positions of trust can’t be trusted.

Hundreds of investment firms have been subpoenaed. Criminal charges have been filed. Members of the top tier of Wall Street’s investment establishment are under scrutiny, including Steven Rattner, founder of a private equity firm called Quadrangle Group and just appointed to serve as the Obama administration’s point man in the bailout of the auto industry. Though Obama has signaled full confidence in Rattner, the investigation is snowballing. 

The New York State pension fund’s $122 billion is a lot of money, but it’s peanuts compared to the trillions in federal bailout money. President Obama has assured that this money will be closely monitored and be used only as intended. I’m sure he means that, but there’s no way. That’s not to say that all of it will be squandered or that it won’t help with our economic crisis.

But, like the New York State pension fund, the money will also be used for bribes, the establishment of sham companies and organizations, and the enrichment of trusted insiders. It always happens, and it will happen with the bailout money. When trillions are in play, mere mortals can’t help themselves.

That’s why codes of business conduct routinely adopted by employers become a source of derision by rank and file employees.