Sestak Isn’t the Real Transparency Issue

The word “transparency” first came into common usage in the United States in 1990 when it was used to describe whether certain foreign countries were open enough for reliable international business. It’s now a badly misused platitude. We’re looking for transparency in all the wrong places—Joe Sestak and the Obama White House instead of derivatives and drug pricing.

You have to go back a long time to find as overcovered a political story as the one involving Bill Clinton (acting on behalf of Rahm Emanuel and President Obama) dangling an unpaid Navy board membership in front of Sestak, presumably as a way of discouraging him from challenging Arlen Specter in the Pennsylvania Democratic primary for Senate. (Specter lost on May 18.)

Ron Kauffman, political director for former president George H.W. Bush, said that if this were a crime, every president since George Washington would be in jail. In the 1980s, Ed Rollins, Ronald Reagan’s political director, bragged publicly of trying to induce California Sen. S. I. Hayakawa out of the Senate with a federal appointment. For Rep. Darrell Issa to throw around charges of corruption when he was silent about Karl Rove trying to fire U.S. attorneys (who are meant to be insulated from politics) is just more predictable hypocrisy.

And the argument that Obama promised something different is false. He never promised not to use political horse sense and engage in political horse trading. No president has ever been successful who wasn’t a wily politician. If anything, as I try to point out in The Promise, the Obama Chicago mafia weren’t Chicago enough. They never learned how to dump a body (David Paterson, Greg Craig) without fingerprints. Their failure to get Sestak out of the race last year was just more evidence of political ineptitude, not malfeasance.

Beyond the need for full disclosure of campaign contributions, politics has never been transparent, and it’s unrealistic to expect that it ever will be.

But government should be transparent, and while the media obsessed over the silly Sestak story they missed the gutting of Wall Street transparency. The compromise brewing on derivatives (or “weapons of mass destruction,” as Warren Buffett called them, while continuing to use them himself) as the House and Senate work out their differences on financial-regulation reform would create a transparent clearinghouse for many transactions, but not all. “Private” derivative transactions conducted by telephone would still be legal.

This is a huge loophole that Wall Street will exploit fully. Beyond a few mentions in the financial press, it has gone entirely unnoticed on cable TV and the other venues obsessing over Obama and Sestak. A major cause of the economic meltdown—credit default swaps and the like—is unremedied, permissible by phone with no third party (much less a regulator) any the wiser.

This reminds me of the health-care debate, in which the idea of transparency for prescription-drug prices—requiring that drug companies and pharmacies simply post what they charge for their products—never saw the light of day. Rep. Steve Kagen of Wisconsin, a physician, rightly says that this would do the most of any provision to bring down prices and restrain costs. His bill to impose such open pricing has received little attention so far—more evidence that the debate on “transparency” is not as transparent as it needs to be.

Jonathan Alter is also the author of The Promise: President Obama, Year One and The Defining Moment: FDR's Hundred Days and the Triumph of Hope.