The Department of the Treasury is throwing money around with the latest American International Group bailout and making the same mistakes that its recipients made.
The Treasury should apply a transparent benchmark to the Troubled Asset Relief Program just like your readership is benchmarked — say, the S&P 500 stock index.
While the Treasury is taking a highly leveraged bet, by financing it through debt rather than taxes, on a very concentrated volatile stock portfolio, a simple benchmark (rather than risk-adjusted) will at least allow taxpayers to evaluate the value of preventing “systemic risks.”
These same Treasury assets could have been used to improve the solvency of Social Security and hence if TARP underperforms this benchmark, then the difference can be attributed to saving the world and not Social Security.
Let us have transparency now.
Arun Muralidhar is chairman of Mcube Investment Technologies LLC and AlphaEngine Global Investment Solution LLC, Princeton, N.J.