WhatOthersSay: Transparency

This editorial appeared in Thursday's Washington Post:

As federal intervention in the troubled U.S. economy has grown, so has the need for "transparency": that is, full disclosure of, and accountability for, governmental allocations of taxpayer money. When the Bush administration came to Congress last fall seeking practically unbridled power to spend $700 billion on a rescue for the financial system, lawmakers balked until they got transparency in the form of multiple reporting requirements and expert oversight. The rules are supposed to prevent abuses by the firms that get the cash and the executive branch officials who give it to them. But Congress did not legislate transparency for its own members' manipulation of the bailout fund, known as the Troubled Assets Relief Program, or TARP.

And so we have the news, first reported in The Post this week by Paul Kiel of ProPublica and Post staff writer Binyamin Appelbaum, that the Treasury Department steered $135 million in TARP money to a bank in Hawaii after Sen. Daniel K. Inouye's staff contacted bank regulators on its behalf. Mr. Inouye, a Democrat, is Hawaii's senior senator. Nothing unusual so far: Members of Congress have been lobbying for home-state banks almost since TARP started so much so that congressional influence is the subject of a TARP inspector general report due out this summer. In one prominent case, Rep. Maxine Waters, D-Calif., arranged a meeting between regulators and OneUnited of Massachusetts, a bank in which her husband held shares. Rep. Barney Frank, D-Mass., later wrote language into the bailout bill that effectively directed the Treasury to give special consideration to OneUnited, and he followed up with a call to Treasury. The bank got $12 million.

If anything, Mr. Inouye's situation looks even more dubious. He was a founder of the institution in question, Central Pacific Financial. As of the end of 2007, he and his wife had several hundred thousand dollars tied up in the bank's stock. On the merits, the case for a TARP loan to Central Pacific was not strong. TARP was meant to shore up healthy banks. But Central Pacific was bleeding capital because of bad real estate loans. Its primary regulator, the Federal Deposit Insurance Corp., considered it a marginal TARP candidate.

Mr. Inouye says that his staff's involvement consisted of a single phone call to the FDIC and that he was not attempting to influence the outcome. But he has yet to say whether his aide acted on his instructions. (His office declined further comment this week.) Mr. Inouye, 84, is a distinguished veteran of the Senate who literally gave his right arm fighting for his country in World War II. All the more reason to be disappointed by this development. Members of Congress must avoid even the appearance of manipulating TARP for the benefit of favored constituents, much less themselves. So far, their efforts have been transparently insufficient.

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Bravado

This editorial appeared in Thursday's Los Angeles Times:

North Korean leader Kim Jong Il decided long ago that nuclear weapons were his best protection against an external threat of regime change. In ill health and preparing his youngest son, "Brilliant Comrade" Kim Jong Un, to succeed him, Kim seems to have decided that the bomb also is crucial to staving off an internal threat to the family dynasty that has ruled the hermit state since its founding. His powerful military wants a nuclear deterrent, and Kim wants to deliver it by 2012. That explains the urgency in his nuclear and missile tests, and makes the prospect of nuclear disarmament doubly difficult. The pending succession adds a layer of uncertainty and risk to North Korea's standoff with the West.

That standoff is playing out on the high seas and in high finance. The Navy is trailing a rusty North Korean cargo ship believed to have been ferrying missile parts for sale to Myanmar. U.N. sanctions to cut off North Korea's arms trade, which were enacted after Pyongyang's second nuclear test on May 25, allow the United States and its allies to intercept the ship. The North Korean government declared that would be an act of war and threatened to "wipe out the aggressors on the globe once and for all" if it considered itself to be under attack. But the ship apparently is turning back now, after U.S. moves to freeze assets and isolate companies that facilitate North Korea's weapons trade. Pyongyang, meanwhile, is poised to test-fire more missiles.

President Obama says he'd like to break the cycle in which North Korea provokes an international crisis to extract aid and concessions from global powers that are trying to sanction Pyongyang into abandoning its nuclear ambitions. The key to ending this brinkmanship, however, lies not with Kim but with Beijing. China is North Korea's main Communist ally and trading partner, and although it would like to see an end to Pyongyang's nuclear program, it has so far demonstrated greater concern about the prospect of regime collapse that would likely create an economic crisis in the region.

China's patience seems to be wearing thin, as it did sign on to the June 12 U.N. resolution. Obama's coordinator on the resolution, Ambassador Philip Goldberg, is in China this week and must work to convince the government that further steps are needed. A credible threat from Beijing to cut off trade could persuade Pyongyang to give up on nuclear weapons. As with Iran, Obama should make clear to Kim that Washington seeks nuclear disarmament, not regime change. At the same time, he should make clear to China that if the North Korean regime were to collapse, the United States and its allies would help share the economic burden.