10/24/2008 05:12 am ET Updated May 25, 2011

Hey Congress, Tell Mr. Paulson: No Public Investment without Public Equity

Wait a minute. What's that smell? Big Daddy might detect a powerful odor of mendacity coming off the Paulson Bailout Plan, but I'm just picking up more rotten fish from the man from Goldman Sachs.

The Bush administration, now presumably winding down, has pursued three activities relentlessly over the course of its tenure: undermining the rule of law, transferring the public wealth to private hands, and attempting to establish imperial sway abroad. While the third of these efforts has not gone well, the administration, with the complicity of a supine and compromised Congress, has achieved astonishing success on the first two. Now, as the election looms, and the administration sees its inner lame duck winging toward that January 20th horizon, it makes one last great and truly spectacular push to roll Congress one more time so as to empty what remains of the public treasury into private pockets.

As we go into a week of negotiations over the administration's plan for a Wall Street bail out, the Congress has a golden opportunity to redeem itself by addressing a simple but crucial question.

Secretary Paulson proposes to stabilize the financial markets by allowing Treasury to buy bad loans from the private sector. While I fully see the urgent need to recapitalize the financial services industry, this seems a peculiar (really a predictably Bushian) way to do it. As Paul Krugman points out, the most equitable and straightforward way for the taxpayers to recapitalize these over-leveraged firms would be to buy not their bad paper, but their stock. This would replenish capital and place a temporary floor under collapsing stock prices.

Most important from the taxpayer's point of view, it would give us an equity share with which to assert the public interest in how these firms are run and to recoup the public investment when they return to solvency.

In this season when they are mindful of the need to return to their districts and ask for our votes, we can help our representatives in Congress keep focus by urging them to assert an essential free-market principle: No public investment without public equity. To do otherwise is simply to continue and greatly exacerbate the practice of privatizing profit while socializing risk.