Blacking Out the Bailout Details

When it comes to the government’s $700-billion rescue plan, it’s clear that a huge amount of money is at stake. As a result, the Treasury Dept. vowed last week to run an “open and transparent program,” so taxpayers know exactly where that money will go and how it will be used.

But as Bailoutsleuth.com explains, it’s a little hard to judge just how transparent the program actually will be, given the information released so far.

The Treasury Dept. hired two accounting firms — PricewaterhouseCoopers and Ernst&Young — to oversee the program. But good luck figuring out their contracts. Copies released by Treasury have key details blacked out or redacted entirely, including information on the bids for the contracts and the partners involved, Bailoutsleuth says.

You can see the contracts for yourself here.

And there are more concerns, especially over conflicts of interest, according to Bailoutsleuth:

Ernst & Young was the auditor for Lehman Brothers Holdings Inc., which filed for bankruptcy on Sept. 15 after potential buyers walked away and federal officials declined to rescue the firm. Certain Lehman executives are the subject of at least three grand-jury investigations.

According to news reports, Ernst & Young also has been subpoenaed as part of the probe. After Lehman’s collapse, Hong Kong’s government hired Ernst & Young to assess the residual value of certain securities that had been guaranteed by Lehman and sold by Hong Kong banks.

PricewaterhouseCoopers became the administrator for Lehman Brothers International (Europe), the European branch of the investment company. It has been winding down that branch’s operations and seeking buyers for its businesses and assets. Both firms also worked for American International Group Inc., the big insurer that has been propped up by the Federal Reserve through more than $120 billion in funding, which essentially makes the government the company’s biggest shareholder.

Kudos to the Bailoutsleuth.com for keeping an eye on how that $700-billion program will be run, and who will oversee it.

Here’s a case where we all should be following the money.