The Treasury Department today released interim policies on hiring contractors to manage the bailout and to handle potential conflicts of interest . The Emergency Economic Stabilization Act, signed by the President on Friday, gives the Secretary of the Treasury what some have called unprecedented powers to contract with the private sector, and these policies are the agency’s first shot at creating some ground rules.  

The procurement guidelines broaden the types of financial institutions that the Secretary can appoint as “agents of the government” that can “conduct transactions on the government's behalf.” They also point out that the Secretary can limit competition for contracts on the basis of “unusual or compelling urgency,” warning that “Treasury anticipates that a number of contracts will be awarded through other than full and open competition.”

As for conflicts of interest, it is primarily up to contractors to disclose them during the process of soliciting contracts: No language on whether the Treasury itself will search for them or how aggressively. If potential contractors do point out a conflict, they must come up with a “mitigation pl.png” that the Secretary will enforce. However, any conflict of interest can be waived by the head of the agency created to manage the bailout. The language also does not explicitly state that the contracts or mitigation plans will be publicly available.  

In short, it looks like these guidelines contain some significant loopholes. The interim policies apply until final guidelines are established: Hopefully the second draft will plug some of these holes up.