From the Lehman board to the board of ed

How refreshing to watch Wall Street reintroduced to "market discipline" this weekend, and how depressing to see "moral hazard" return by Tuesday night. The government's refusal to rescue Lehman Brothers seemed to indicate that financiers would have to face the consequences of their own risky actions. But then AIG was deemed "too big to fail."

Predictably, some education analysts are already pointing to the market meltdown as a cautionary tale about deregulation and "privatization." I don't know enough about high finance to say whether the 1990s-era policies and practices that lowered traditional barriers between bankers and other investors led to this malaise. But surely there's a better lesson in this mess for schools than just the "regulation is good" story line that certain interests want to peddle.

In the education sector, too, there's a history of bailing out organizations deemed "too big to fail." That's why states have come to the rescue of huge urban districts, long after they have demonstrated an utter inability to get results or balance their books. It's only the small fry--tiny, public charter schools--that ever actually go under. As well they should, if they aren't getting the job done for kids or aren't spending public funds prudently.

The Detroit Public Schools is the AIG of education. It's big, it's bad, and it's broken. And while its ship sinks, board members and superintendent squabble over "rudeness." Is there any reason to believe that current governance arrangements, political dynamics, and leadership are conducive to the systemic transformation needed to save Motown's children from a life of despair?

What's needed is a fresh start, a do-over, a clean slate for Detroit. Simply put, the state should declare Detroit Public Schools bankrupt. (Just today it declared its intent to oversee its finances.) The Michigan legislature took over in 1999 but returned the city to an elected school board in 2005 without making fundamental changes; now's their chance to get it right.

Michigan should take the system into receivership and void or renegotiate all of its contracts (including its collective-bargaining agreements with teachers and sundry other unions). It should slice through any red tape that would keep Detroit from creating a world-class system, including Michigan's cap on new charter schools and its burdensome teacher-certification requirements, not to mention its low academic standards. It should recruit a fearless leader to build, from the bottom-up, a strong curriculum, a culture of excellence, back-office and human resource routines that work--all the elements of a functioning organization. Such an organization would give the public the transparency around spending, processes, and results that has been so lacking on Wall Street lately, and lacking in most big-city school systems forever.

Instead, lawmakers will likely infuse DPS with yet more cash in order to (once again) bring the district out of insolvency. And they will try to "protect" the system by keeping additional charter-school competitors out. (Clearly, Governor Jennifer Granholm's interest in making Michigan more "competitive" doesn't extend to its public schools.)

Americans are understandably growing impatient with government bailouts of Wall Street. When will we become just as frustrated with government bailouts of dysfunctional public-school systems?

This article first appeared on National Review Online.

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