Tilting at Windmills

In our last issue, as a part of the effort to educate the new president on the culture of the executive branch of government, I emphasized the need for a president to reach down the chain of command and outside it to learn what is really going on beneath him. Toward that end, I have encountered no better advice than that given to Barack Obama by Senator Jack Reed during Obamas visit to Iraq in July. According to the Wall Street Journals Gerald Seib, Reed told Obama that “a good way to get some unfiltered information about what is happening on the ground is to talk to junior officers and journalists on the scene.”

Lieutenants and captains who are actually doing the fighting have firsthand knowledge of what is working and what is not. There are analogous figures in every bureaucracy, close enough to the action but with enough command responsibility to give them an ability to generalize.
Theyre usually more candid about what doesnt workafter all, they just saw one of their men die from lack of body armorthan generals, who often are so enamored of big-ticket items that will grow their budget that they ignore essential and lower-cost needs like body armor.

I agree with Reeds point about journalists. However, a distinction should be made. The journalists who are covering the war in Iraq should be consulted. They have firsthand knowledge based on experience. By contrast, the White House reporters often occupy the same bubble as the president and can tell him little that he doesnt already know.

Among the economic advisers Obama is said to rely on are Robert Rubin and Larry Summers. Certainly, they are smart guys whose advice could prove valuable from time to time. But before giving them top jobs, Obama should remember that they were both dead wrong about the danger of derivatives, preaching against the need for regulation of theseas Warren Buffet puts it”financial weapons of mass destruction.” Furthermore, Rubin, after serving as Clintons treasury secretary, joined Citigroup, where he was paid millions to front for the transformation of a solid bank into a financial supermarket that had become one of the shakiest institutions on the Street by the time it was bailed out. Throughout this process, Rubin never uttered a peep of protest.

We were all shocked by the gang from AIG living high at the St. Regis Resort in Dana Point, California, at the same time they were being bailed out by the taxpayers. But did you know that AIG is also, still, according to Elizabeth Williamson of the Wall Street Journal, “spending money to lobby states to soften new controls on the mortgage industry”? A lot of that money, of course, comes from the pockets of you and me and other Americans.

News of similar import comes from the Journals Dennis Berman, who describes a recent gathering of big shots from Wall Street giants like Goldman Sachs and J. P. Morgan Chase. They insisted on talking about their need for tax breaks, protection from class action suits, and the repeal of Sarbanes-Oxley, instead of assessing their responsibilities for the financial disaster that has overtaken the country. One of the big shots, writes Berman, “took on a wounded look, saying that none of the people on the panel had done anything wrong.”

To top it all off, Rachel Beck and Joe Bel Bruno of the Associated Press report that “the nations biggest banks are preparing to pay their workers as much as last year, or more.”

There are all sorts of ways for the new president to bone up on how his government can fail. Even movies can help. Tora! Tora! Tora! gives a blow-by-blow accounting not only of the mistakes made by political and military leaders but also of a malfunctioning chain of command that denied them critical information again and again, with Pearl Harbor the result.

A Bridge Too Far shows a president an all-too-typical way he or one of his agency heads or generals can screw up. In the movie, a British commanders willful blindness to facts that do not fit his plan leads to the disastrous attempt to take Arnhem in 1944. Think George W. Bush invading Iraq in 2003.

The Hospital exposes how a public institution can come to almost completely ignore the best interests of the people its supposed to serve. The Hospital is also a very funny satire, with great performances by George C. Scott and Diana Rigg.

Also funny as well as instructive is the British television series Yes Minister, featuring Nigel Hawthorne in the role of a clever bureaucrat skilled at manipulating his boss. Think Dick Cheney.

For books that could help the new president, one that I recommend is Angler: The Cheney Vice Presidency, by Barton Gellman. I hope the president will not have anyone working for him as consistently wrong as Cheney is. He can be sure, however, that he will have subordinates who at least on some issues think they are smarter than he is or know better what should be doneand that they will employ techniques similar to Cheneys to get their way. One Cheney tactic, also said to be much favored by General David Petraeus, is known in the military as UNODIR, short for “unless otherwise directed.” The way this works is the official decides on his own on a course of action, initiates it, and then informs his superiors that hell continue “unless otherwise directed.”

Speaking of the bailout, I have to brag about our alumnus Joe Nocera. (You have to understand that with our alumni, Im like the proud grandfather flashing pictures of the kids.) Now a columnist with the New York Times, Joe was the first to spot a crucial defect of the original bailout proposal, pointing out that the reason we were in this mess was that no one knew how to value the toxic instruments. How, he asked, was the Treasury going to buy something that could not be valued? Then, Joe spotted the crucial defect of the bailout that is now taking place: “Unlike the British government, which is mandating lending requirements in return for capital injections, our government seems afraid to do anything except plead.” The result is that banks are holding on to much of the money that the Treasury invested in them and are not lending enough of it to reenergize the economy. The Treasury should demand that the banks receiving the money lend at least a goodly part of it.

I have often criticized the press for failing to follow up to determine how laws passed by Congress are actually carried out. Too many times good intentions are thwarted by inept execution and other factors. See the book Reforms at Risk, by Eric M. Patashnik, for examples. That is why I now challenge my colleagues to follow up on the bailout legislation. What are the taxpayers getting in return for their investment? Are the bureaucrats in charge making the kind of deals Warren Buffet made with GE and Goldman Sachs, or are they giving in to pressure from lobbyists for the financial institutions and getting much too little in return? And what is happening with executive compensation at the companies we are rescuing? Are reasonable limits being enforced? And are dividends being paid to stockholders before the government gets its fair share?

The new president, faced with the need to devote huge sums to bailing out the financial community, is going to have to look for cuts in the rest of the federal budget. I suggest he take a look at the big-ticket items from the Pentagon.

One possibility for elimination is the Osprey helicopter, which Times Mark Thompson has described as a $20 billion boondoggle. After killing thirty men in test runs, the Osprey is finally operational in Iraq, and, in welcome contrast to its past record, has not crashed again. But, reports Bradley S. Klapper of the Associated Press, critics say it “lacks firepower for defense in heavy combat.” As a result, it “avoids day flights into Baghdad or other tasks that entail excessive risk.” For a helicopter designed to ferry troops into battle, this strikes me as a less-than-persuasive selling point.

Speaking of stories to which the press should attend, none is more important than Michelle Rhees struggle to get rid of the dead wood among Washingtons public school teachers. She is being opposed by the local and national teachers unions, but her effort is crucial, for what it can mean not only for Washingtons dysfunctional schools and for other school systems that have similar problems, but also for the new president if he is going to revitalize the federal civil service.

One sure challenge for the new president will be to reform regulatory agencies. The need for reform is equally great at financial regulators like the Securities and Exchange Commission and at health and safety agencies like the Food and Drug Administration. The George W. Bush administration has presided over the greatest sellout of regulators to the regulated since regulation began. It has to be conceded that selling out was already under way before Bush took office, but Bush greatly accelerated it and continues to put the pedal to the metal even in the last days of his administration.

Just one example of lame-duck skullduggery comes from the Consumer Product Safety Commission, where, Alicia Mundy of the Wall Street Journal reports, “Bush administration officials, in their last weeks in office, are pushing to rewrite a wide array of federal rules with changes or additions that could block product-safety lawsuits by consumers and states.”

Most of these agencies have been led by deregulatory zealots who have demoralized their good employees, causing many of them to resign and leaving behind agencies desperately in need of an infusion of quality people. In some agencies, like the SEC, an industry-friendly leader like
Christopher Cox exacerbated a cultural tendency to indulge buddies who had gone into the securities industry. Thus, in the fall of 2007, David Nelson, the head of the SECs Miami office, called a pal at Bear Stearns to tell him that “Christmas is coming early.” Nelson would be shutting down an investigation into Bear Stearnsan investigation that would have discovered whether the firm had, according to the Wall Street Journal, “improperly valued complex debt securities.” As we all found out too late, this was a sin that Bear Stearns had in fact committed (as Dick Cheney would put it) big-time.

In the old days there was at least a smidgen of honor in the revolving-door relationship between SEC staff and the agencys alumni on Wall Street, with the classier fellows trying to persuade their new employers to follow the rules. Unfortunately, that honorable tradition is in sad decline.

One suggestion I would make to the new president is that he reform the SEC before he merges it, as many critics are urging, with other regulatory agencies. Recall the Homeland Security merger, in which the Immigration and Naturalization Service was merged with other agencies. It was bad before the merger, and the merger hasnt helped. Its still bad. “Illegal immigrants,” report Nick Miroff and Josh White of the Washington Post, “stay in the country far longer than they should because of a detention and deportation system beset by waste and dysfunction.”

Sometimes journalists seem to identify with Wall Streets self-pity. Thus
Andrew Ross Sorkin of the New York Times, describing how no bonuses at UBS last year exceeded $750,000 in cash, went on to observe: “That is still an extraordinary amount of money, but given the costs built into many bankers lives mortgages, private school and so onthe money can quickly run out.” $750,000 quickly runs out! Remember, were talking not about basic salary, but about a bonus added onto it. Why, one might ask, should the mortgage have to be so big? And why is private school assumed to be essential?

It amazes me how so many journalists have come to identify with the upper class, feeling that private school is essential for their kids. And have you noticed how many of the male journalists you see on television are wearing custom-made suits? It used to be that every suit in the newsroom was right off the rack, and usually from a store of absolutely no snob value. As for the female television reporters, I would suggest that more than a few of them who made fun of Sarah Palins wardrobe from Saks Fifth Avenue and Nieman Marcus are wearing similar labels.

For that matter, how have so many people in the whole country gotten into the mindset that requires private schools and custom-made suits, not to mention houses pricey enough to require big mortgages? I suspect one cause may be found in our high priest, the psychiatrist.

You could see it coming in an article that E. Fuller Torrey wrote about his fellow psychiatrists in this magazine twenty years ago, in which he described his professions distaste for charity or pro bono work or anything that didnt pay hard cash. Now comes news from Gardiner Harris of the New York Times that one of the nations most influential psychiatrists, Dr. Charles Nemeroff, earned more than $2.8 million in consulting fees from drug makers, violating federal rules requiring researchers to disclose conflicts of interest. Just one example of Nemeroffs excesses: he promised his research institution, Emory University, that he would earn less than $10,000 a year from GlaxoSmithKline. On the very day he made that promise, “he was at the Four Seasons Resort in Jackson Hole, Wyo., earning $3,000 of what would become $170,000 in income that year from that company.”

Nemeroff is far from being an exception among psychiatrists. Dr. Melissa DelBello told University of Cincinnati officials that she received $100,000 from eight drug makers from 2005 to 2007. But then it developed that shed gotten $238,000 in that period from just one company, AstraZeneca. Still, she was a piker compared to Harvard Medical Schools Joseph Biederman and Timothy Wilens, each of whom took in more than $1.6 million from drug makers between 2000 and 2007. The newly elected president of the American Psychiatric Association, Alan Schatzberg, has $4.8 million in stock holdings in a drug development company.

So if you ever wondered who taught Gordon Gekko, Michael Douglass character in Wall Street, to proclaim that “greed is good,” his shrink should be high on your list of suspects.

As an antidote to the culture of greed, the example of Michelle Obamas brother Craig Robinson is edifying. He had been on the typical Gordon Gekko career path, working at Morgan Stanley Dean Witter and owning a Porsche 944 Turbo and a BMW station wagon. Unlike so many of his contemporaries, however, he woke up: “Ive got all this stuff, and it hasnt made my life any better.” In his late thirties, writes Liza Mundy in her new book about Michelle Obama, Craig “left investment banking for a job he loves, coaching basketball.”

The tendency of the Washington press corps to live in the same bubble as the White House means that they focus too much on what is happening in the show thats playing on the Washington stage. By contrast, they pay far too little attention to what is happening outside the Beltway, to the problems the average man encounters every day and to the needs of the nation that Washington should be facing.

One way to step out of the Washington bubble is to read the Metro section of the citys papers, which describe the real problems faced by people in Virginia, Maryland, and the District. I also regularly read my hometown paper, the Charleston Gazette, and when Im out of town I make a point of trying to read the local paper wherever I am. And, as Monthly readers know, I rely on my son, Chris, to rub my nose in the problems he encounters as a high school teacher in San Bernardino, California.

The latest example of the kind of thing I learn from Chris concerns the shortage of nurses weve been hearing about for several years. Chris tells me that many of his students want to be nurses. Some are held back because they cant afford the college tuition, but many others who are admitted to college and can afford it are still unable to get into nursing programs, because there are not enough places.

Soon after Chris told me about this problem, I ran across a story in the Gazette about one Freda Price. She had been trained to be a nurse by the nuns at Charlestons St. Francis Hospital. Back thenshe entered in 1949the tuition for the three-year training program was eighty dollars. Students were also provided with uniforms and free room and board. Unfortunately, this kind of affordable hospital training no longer exists. It was abolished in an effort to upgrade the status of nurses by requiring their training to be part of a college program. But even though Freda Price didnt go to college, she has turned out to be skilled enough at her profession to have been named the states “Nurse of the Year,” not just once but twice.

There may have been some bad hospital nurse training programs, but there were also a lot that were very good. We had quite a few Freda Prices in the Peace Corps while I worked there in the 1960s, and they were first-rate. But the hospital-trained nurse is a dying breed, all because of the insane credentialism that has obsessed this country.

This credentialism also has a baleful effect on education, by judging teachers by their degrees and education credits rather than by their subject knowledge and classroom aptitude.

Cosmetic advertising has long been a kind of paradise for Madison Avenuetotally unregulated. Any claim can be made. Women desperate to enhance whatever nature gave them have been eager prey for even the most remotely plausible promises.

Endowing beauty products with an aura of science, reports Natasha Singer of the New York Times, is the latest fad. LOral skin cream promises “cellular-level cleansing.” And the Olay Regenerist face cream, women are assured, is based on “Aquacurrent Science,” which “helps reverse the look of lines and wrinkles.”

Heres another lesson for the new president in the culture of bureaucracy, this from Bob Woodwards The War Within. When Admiral William J. Fallon took over Central Command, he was dismayed to find how large a staff he had inherited. “Give me a breakdown,” he asked. “How many are in my security detachment?”

This explains much of the staffing at military and diplomatic posts as well as at old-line federal agencies. The new president needs to follow Admiral Fallons examples and ask, “For what?”

As a member of the Peace Corps staff during the 1960s, I frequently found myself in awe of the dedication of the volunteers. Not all of them were saints, of course. Indeed, there were a few quitters and some so useless they had to be sent home. But I was reminded of the good volunteers by a recent story in the Washington Post. Officials in Washington had decided to withdraw the 113 volunteers in Bolivia because of the countrys political instability. At a meeting of the group in Lima, Peru, after they had been withdrawn, half the volunteers indicated they wanted to return to Bolivia despite the danger. They were, however, strongly discouraged by officials. Still, at least fifteen have returned and are now hard at work at their old jobs. These people are part of a rare breed that I consider myself blessed to have known.

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Charles Peters

Charles Peters is the founding editor of the Washington Monthly.