Egads…sound familiar…American taxpayers are now on the hook for billions of dollars…this time to bail out Freddie Mac and Fannie Mae and try to keep the economy from entering into a deeper tailspin. You can read about this virtually everywhere and there is a palpable fear here–that it may not be enough…

   But, virtually no attention has been paid to the fact that this has been a one-sided deal: the public gets no say in how the institutions will be run. Congress can, and must, change the rules.

    In essence, the bailout amounts to a giant transfer of wealth from American taxpayers’ pockets into the hands of foreign central banks (principally the Chinese), government investment funds and global investors who are sitting on huge amounts of debt issued by the two companies. Those economic powers were not about to allow $5 trillion dollars evaporate. But, while we may be stemming a mammoth collapse, we haven’t fixed the fundamental problem.

   We got into this mess, in part, because the two institutions were run to enrich their executives—who should have been fired long ago—and to maximize profits. Rather than keep in mind their primary mission—stabilizing the housing market and making sure average Americans could get loans—the companies became part of the problem, egged on by a coterie of people who cared only about jumping quickly on the quick-buck conventional wisdom that inflated the housing bubble. We can’t let this happen again.

   The first thing we need is to make sure the Freddie and Fannie boards are run by, and for, the public. We have a precedent. The Home Owners’ Loan Corporation was born in 1933 when the country faced a massive housing loan crisis. It ended up owning one in five mortgages. The board was run by the government.

   Congress should require that the boards of Freddie Mac and Fannie Mae be restructured. A third of the board should come from the ranks of elected officials, appointed by the President, the Speaker of the House and the Senate Majority Leader; as well, we need a mechanism to include representatives of state and local government because the collapse of the housing market has implications for governance beyond Washington. Another third should come from non-elected officials, including unions whose pension funds are deeply involved in housing investments. The last third of the board could contain representatives of private industry.

   Second, the new board should, then, issue shares to the public. Every person earning under $65,000 a year should be given a share in Freddie or Fannie—for free. Think of the share as a small payback for the investment made using the taxpayers’ hard-earned money—an investment made without their consent. If the share should appreciate over time, taxpayers would get a small benefit in return.