No Blank Checks

Federal Reserve Chairman Ben Bernanke has compared the credit crisis to a clogged artery. Unless cleared, the patient will arrest, and recovery from such a collapse might take years.

This is the dreary prognosis that Americans are considering as Congress debates whether to pay $700 billion to unclog the nation's credit arteries — $2,300 for every American citizen.

Taxpayers are rightly furious that so much money might be spent because of the greed of so few. But it is the right thing to do if the alternative is as bad as Bernanke and Treasury Secretary Henry Paulson have portrayed it.

On Sept. 17, the circulatory system that provides credit very nearly collapsed as investors fled money market funds and short-term loans to banks froze up, The Wall Street Journal has reported. Without intervention, officials believed, companies might soon be unable to fund day-to-day operations. They feared the economy was grinding to a halt.

The Paulson and Bernanke solution is to have the government buy up investments that no longer can be traded — most of them mortgage-backed securities — and hold them until they can be sold. The total price tag might be lower if the government can sell these securities at a profit.

Congress must demand strict accountability and transparency from this audacious plan.

Here's what's needed:

— A bipartisan advisory board set up jointly by the administration and Congress to monitor the process.

— An option to take shares of stock in companies that participate as another means to protect taxpayers.

— Protection for average homeowners: Allow bankruptcy judges to modify mortgages. The lending industry has blocked this provision in the past, but it's time to open this artery, too.

— Limits on executive compensation. Executives of institutions that sell bad debt to the government shouldn't profit directly from the sale, and their compensation should be limited if the government has to inject a large amount of money into their firms.

Finally, we have some advice for our friends in Congress, who are so eager to adjourn at the end of this week for the fall campaign:

The nation is on the verge of spending hundreds of billions of dollars on securities that are viewed as so distressed they no longer can be sold through normal markets. This is a momentous decision that could remake American capitalism for decades. If Congress must remain in session past this weekend in order to craft a thoughtful bill, so be it. Members will have even more to brag about back home.

Unclog the arteries quickly — but make sure that the cure isn't worse than the disease.

REPRINTED FROM THE MILWAUKEE JOURNAL SENTINEL.

DISTRIBUTED BY CREATORS SYNDICATE, INC.