The exhortation to "spend, spend, spend" willy-nilly is not only absurd on its face -- why build pyramids, or bombs, when you can build bridges, or, still better for stimulus purposes, increase unemployment benefits? It also runs the risk of abusing the public trust insofar as it lacks accountability. Take the Troubled Asset Relief Program (TARP), for example. TARP, the $700 billion economic recovery package, is the single-largest expenditure authorized by Congress in one bill ever, in absolute terms. The lack of transparency regarding how these taxpayer dollars are being spent threatens to corrode the already diminished public trust and could impair the ability of the government to respond commensurately with the magnitude of crises and threats in the future.

Addressing this problem should be at the top of the agenda when the new Congress convenes next month.

Many people, from lawmakers on Capitol Hill to citizens around the country, have expressed frustration and disappointment that they cannot get more than cursory information regarding transactions executed to date pursuant to the TARP legislation. Even more dismaying is widespread confusion about what strategy the Treasury Department is following in making its transactions. Furthermore, many have serious concerns about the possibility that taxpayer money is being used for bonuses, golden parachutes, dividends, stock repurchases, etc., that is, in ways not contemplated when Congress passed the TARP legislation.

To this point, two kinds of financial instruments have been used to complete TARP transactions. Financial institutions receiving anywhere from a few hundred million dollars to those getting upward of $20 billion dollars under TARP have given the Treasury Department either preferred stock or warrants in return. But almost nothing is known to the public about these stock and warrant purchases. The key questions are: How much are these instruments worth and how much are the taxpayers paying for them? What is the taxpayer's expected return and when are they likely to receive it? The shortage of information to date has bred broad resentment and distrust.

One way to address and remedy this uncertainty and stem the rising distrust would be to change the way TARP funds are allocated and disbursed for the final $350 billion TARP tranche. This could be accomplished by Congress passing a statute or Treasury acting on its own accord. To date, restrictions on use of funds have been comprised of general, poorly defined and possibly unenforceable "thou shalt nots" relating to executive compensation, dividends, etc.

Instead, funds could be approved on a "project finance" basis, which would introduce enhanced transparency and enforceability into the selection process and the use of funds:

• invite financial institutions to submit proposals for funding specific projects and purposes, e.g, for interbank lending, consumer loans, distressed asset sales, mortgage foreclosure forbearance and modifications, etc.;
• require that such proposals indicate clearly how the institution would not be able to undertake these project but for assistance from Treasury under TARP;
• require the institution to indicate a date certain by which the project(s) are to be completed; and
• require the institution to foreswear the use of TARP funds for non-approved purposes - and enforce with penalties for violations.

After funds for proposals have been disbursed, Treasury would then make public key information relating to the proposals approved and the transactions by which they are to be financed.

Among the key points of disclosure relating to these transactions would be: the size of the purchase; the coupon rate; collateral provided; the term, in years or perpetuity; the transferability of any preferred shares/warrant; restrictions on dividends, executive compensation, etc.; repurchase conditions; voting rights; the ranking, pari passu vis-a-vis other preferred shares; and redemption terms.

Some additional follow-up reporting requirements would also be necessary. Ultimately, taxpayers should know: How did they fare when the Treasury sold or redeemed the stocks or warrants it purchased with their money?

Now, these are exceedingly difficult questions to answer, but the government is honor bound - and should be legally bound - to do its best, consistent with the goal of maintaining stability in the financial sector. The burden of proof is on the Treasury to show why the release of term sheets and recipient institutions' balance sheets should not be allowed in every instance.

The foregoing is not designed to retard, impede, or obstruct the deployment of the final tranche of TARP. The idea is simply to ensure that the government has the informed consent of the governed in its methods for dealing with the nation's greatest economic crisis in decades.

We will never know if TARP succeeded - it would be impossible to disaggregate the impact of TARP from that of the Federal Reserve, which has kicked in several trillion dollars (another debate for another day). But, at a minimum, Americans deserve to know how their taxpayers' dollars are being spent to combat the crisis. How much they know may well determine the extent of their consent the next time.