Bailout Watch: Bush's Subtle Scheme to Stop Obama Reforms

In his first radio address as President-elect [1], Barack Obama made this strong statement:

"[We will] ensure that the rescue plan that passed Congress is working to stabilize financial markets while protecting taxpayers, helping homeowners and not unduly rewarding the management of financial firms that are receiving government assistance."

That's an important marker - this Financial Week story [2] shows, the corporate community takes the declaration seriously. All of that is good news. As Naomi Klein ably shows [3], fixing the bailout is not just a piddling side project - if left the way it is, it could cripple the economy.

That said, it looks like the Bush administration is going to do everything it can to keep things just the way they are.

Buried in the Washington Post's paean [4] to George Bush's newfound commitment to transparency and bipartisanship, we get this nugget that suggests a more pernicious motive to the niceties:

Likewise, the administration is laying the groundwork for an unusual level of access to the Treasury Department and other agencies involved in attempts to stabilize the foundering economy. White House spokesman Tony Fratto said Friday that Treasury is preparing office space that will allow Obama aides to sit alongside current dministration officials.

Fratto said such efforts are intended to send a signal that Treasury's approach will not change too abruptly when Obama takes office. (emphasis added)

There you have it - in newspaper print, no less. The current administration on record saying the objective of involving Obama's transition team in Treasury decisions is to try to coerce that team into backing off Obama's own promises (to use the Times' own phrasing) to abruptly change Treasury's current approach.

Now, I don't think for a second the scheme is going to fully work. Obama's not filling his first economic declarations with promises of bailout reform with the intent of allowing a humiliated Bush administration to stop him. I may be cynical, but I'm not cynical enough to believe that Obama goes totally flaccid on this issue. He saw the presidential exit polls showing the bailout bill is more unpopular than ever. And he clearly has the capacity to understand that a poorly executed bank rescue could destroy his ability to right the economy.

That said, anyone who has worked in government knows things are never black and white. When expectations are forged, subtle pressure administered, and devilish details written, it can be difficult to convert foundational principles into federal law, especially when you are effectively sharing power with another power player (in this case, the outgoing president).

So bottom line: The bailout, because it vests so much power in the White House, is certainly something to keep a close watch on during this transition and in the early months of the Obama administration. The incoming president will have near-dictatorial control to change the program any way he sees fit, without much input from Congress at all. But the outgoing president has that dictatorial control now - and is now on record saying he's going to try to use that control to try to preemptively tie the hands of President Obama.