Tilting at Windmills

September/ October 2013 Cashers in … Swat teams … And the new Enron

By Charles Peters

The Gilded City

For many years, Washington was a city of modest lifestyles, largely determined by the civil service salary scale. That began to change in the 1970s with the growth of lobbying into a major local industry and the considerably higher compensation enjoyed by its practitioners. Then came the great increase in defense spending under Ronald Reagan and the wealth it brought to the Washingtonians who assisted military equipment suppliers in procuring contracts. And then, in response to 9/11, came the explosion in contracting out other functions of government to firms like Booz Allen Hamilton and the immense profits made by its owners, the Carlyle Group, not to mention the real estate developers who supply the newly rich with the office buildings and very large houses they demand.

Other suppliers of luxury products have also prospered. By December of last year, the local Aston Martin dealership, established in April to sell cars costing between $130,000 and $310,000, already ranked fourth in sales for Aston Martin dealerships in the United States, according to Mike DeBonis of the Washington Post.

Aren’t former public servants supposed to live like kings?

Cashing in has become such an accepted feature of life in Washington that Mark Leibovich can write in his new book, This Town, that “[s]cores of [Obama] administration officials had by 2010 left the administration for K Street jobs, without anyone so much as pointing out that they were defying a central tenet of the Obama political enterprise.” Even Ruth Marcus, the “Ms. Common Sense” of the Washington press corps, recently wrote a column defending the revolving door. I concede that Ruth is right that learning where the bodies are buried in the private sector can help you find them as a public servant. Unfortunately, too often the friendships you have formed in the private business, or your actual participation in the burials, make you reluctant to face the consequences of digging the bodies up.

When I arrived in Washington in 1961, people became public servants because of idealism, a yen for power, or a desire for job security. Only a handful was thinking of how to cash in. As getting rich became a national obsession, their number is legion.

By George!

On the night of Obama’s speech at Knox College on the economy, ABC News led with the story of the new name for the royal baby. NBC and CBS led with the Obama speech, but NBC gave as much time to the royal baby as it did to the speech. By contrast, the CBS Evening News, which strikes me as having the best sense of priorities in evaluating the significance of the day’s developments, gave the royal baby’s name only the time it took Scott Pelley to read one short paragraph.

Candy, roses, and private interviews

For further insight into modern journalism, consider Obama’s problem in getting his economic message across to the country. The New York Times placed its account of his Knox College speech, which the White House had said was intended as a “major address,” on page A19. What could Obama do to break through? Grant a personal interview to two Times reporters. Voila! Front page of the Sunday Times.

Office of Personnel Goofs

Whether you regard Edward Snowden as a sinner or a saint, you have to concede that something went awry when he was given top-secret clearance. USIS, the private contractor that performed the most recent background check responsible for Snowden’s top-secret clearance, is itself being investigated by the Office of Personnel Management’s inspector general for the “systemic failure to adequately conduct investigations under its contract”—an investigation that was already under way when USIS was assigned the Snowden case.

This was among several disconcerting facts that emerged from the June 20 hearing of the Senate Subcommittee on Financial and Contracting Oversight chaired by Claire McCaskill. It seems that there is no standard for determining what security clearances are needed for specific federal contractor jobs and that 87 percent of the investigation files are incomplete, meaning, for example, that the background investigator decided to skip an interview with a past employer in favor of a more leisurely lunch without bothering to explain the omission.

The June hearing was televised by C-SPAN, but was largely ignored by the media until August 3, when the Wall Street Journal’s Dion Nissenbaum revealed that one reason for the sloppy investigations was pressure from USIS executives to rush investigations to meet quarterly goals, a practice insiders described as “flushing.” In my experience, numbers goals can be desirable to get employees moving, but the boss always has to take care to find out what employees are actually doing to meet those targets.

The sloppy investigations are one scandal, but there is another. Did you know that 4.9 million federal and contractor jobs require security clearances, 1.4 million of which are top secret? This does suggest the national security state has gone mad.

Morgan as Enron

Speaking of mad, remember how outraged we were to learn that Enron executives had manipulated the price of electric power? Now we’ve learned that the same kind of fooling around with prices is happening again, only this time it’s by the big banks. You probably saw the front-page story in the Times about Goldman Sachs doing it with the price of aluminum by,among other devices, controlling the warehouses that store it. But did you also see the stories, mostly confined to the business pages, about how J. P. Morgan Chase manipulated energy markets in California and the Midwest by charging “more than 80 times prevailing power prices,” according to the Post? Morgan, caught by the Federal Energy Regulatory Commission, recently agreed to pay $410 million to settle the case.

The repeal of Glass-Steagall seems ever more tragic. Not only are the banks permitted to trade in commodities, they’ve been getting away with fixing prices by fiddling with the supply.

Straight As for B school

If you want to get into business school, study the reporting of the Journal’s Melissa Korn. Her latest insight into the thinking of their admissions officers: They look for As in your undergraduate records, regardless of the courses you take, so the poor guy who chooses rigorous courses and demanding professors will lose out to the fellow who goes for the easy A. And as long as the admissions officer thinks colleges are of similar quality, he will choose the applicant with the As, even if the grading standards of the school are lower. “In other words,” observes Korn, “an applicant with a 3.6 GPA might wow the admissions office, even if the average student in that person’s graduating class finished with a 3.7.”

Keep a weather eye open

Back to our friends on Wall Street. Here are the results of a survey reported by Andrew Ross Sorkin of the Times in which 250 insiders from dozens of financial companies evaluated their own morality: 23 percent said they had “observed, or had firsthand knowledge of wrong doing in the workplace,” and 24 percent said they would “engage in insider trading to make $10 million if they could get away with it.” And 26 percent “believed the compensation plans or bonus structures in place at their companies incentivize employees to compromise ethical standards or violate the law.”

The key phrase in all this seems to me to be “if they can get away with it.” The only way to keep Wall Street—and, for that matter, other institutions, like unions, universities, and the government itself—on the straight and narrow is to let the people in them know we’re keeping an eye on them, and that the chances they’ll “get away” with malfeasance, misfeasance, or nonfeasance are slim enough to keep them from trying.

At the same time, it’s silly to think we can do without these institutions, an attitude that is most conspicuous among the antigovernment crowd. You want someone to send you that Social Security check, and to make sure that your plane will land safely, and to inspect the bridge you’re crossing so it won’t collapse. But you don’t have to assume that the people performing these functions are super-competent or super-dedicated. You have to keep an eye on them to know how they are hired and how they perform. Your regard for higher education does not mean that you have to uncritically accept every tuition increase, as we have done for far too long. In all these cases, the key is not automatic hostility to the institution, but automatic informed skepticism.

Speaking of sellouts

From the Obama administration, perhaps the most prominent casher-in has been Peter Orszag, who went from serving the public interest at the Office of Management and Budget to selling his skills and knowledge to CitiGroup. (The revolving door brought Jack Lew from CitiGroup to replace Orszag as budget director and ultimately to become secretary of the treasury.)

Now comes the news, supplied by Jim Rutenberg of the Times, that the young geniuses behind the Obama victory in 2012 are also cashing in. They recently formed a new business, Analytics Media Group, “to deliver to commercial advertisers some of the Obama campaign’s secret, technologically advanced formulas for reaching voters.”

An IOU at least

When Bill and Hillary Clinton were being persecuted by Ken Starr’s team of zealots from the Federalist Society, a friend of mine, knowing the Clintons were financially strapped, took on the task of raising money for their legal defense. He was able to persuade thousands of donors, large and small, to provide the needed funds. When the Clintons left the White House, books and speaking engagements quickly made them quite wealthy, but they have still not offered to reimburse those donors. I admire them both, but if you were in their shoes, wouldn’t you feel just a tad guilty, especially about the donors of modest means?

Old tricks, new dogs

Back to the banks’ most recent shenanigans. It seems that the Commodities Futures Trading Commission has, according to Gretchen Morgenson and David Kocieniewski of the Times, “taken the first step” in examining Goldman Sachs’s warehouse operations. They also report that the Federal Reserve is reconsidering its 2004 decision allowing banks to own commodities. (Why on earth did the Fed allow that in the first place?) And a Senate Committee “is expected to focus on how banks have taken advantage of loosening federal regulation to buy warehouses, pipelines, oil tankers and other infrastructure used to store basic goods and deliver them to
consumers.” One place I suggest they investigate is the oil tank cars used to transport oil by train—the kind that exploded and killed all those people in Canada. Most of these tank cars do not meet federal safety regulations, and most are not owned by the railroads. How many are owned by the banks?

Best where most needed

Back to my point about not being automatically in favor or against an institution. You may have heard from public school advocates that charter schools perform no better than public schools. Indeed, this is largely confirmed by the most recent study by Stanford University’s Center for Research on Education Outcomes, although the charters did do slightly better on reading. In some places, however, charter schools made a big difference. In general, poor children, particularly African American and Hispanic, made significant gains at charters. Charters also produced the best results in states that shut down the poorest-performing schools. Among the places where charter schools have performed significantly better are Washington, D.C., and New York City—two cities where teacher’s unions and their allies’ opposition to charters has been fiercest.

Not just a few bad apples

One cause to which this magazine has been dedicated for forty-four years is better teacher training. That we have not been as successful as we would have liked is, alas, the verdict of a recent report by the National Council on Teacher Quality. It rated teacher preparation programs at undergraduate and graduate schools on the basis of selectivity, student teaching requirements, and how well they prepared teachers to teach math and reading. Of the 1,200 programs from 608 colleges and universities included in the study, only four, all for secondary school teachers, got four stars, the top rating. Fourteen percent got zero stars.

Watchful eyes

If the Times erred in not putting Obama’s Knox College speech on its front page, it earned gold stars by leading with Goldman Sach’s aluminum warehouses. And it deserves credit for another lead story about how Standard & Poor’s has gone back to dishing out overly generous ratings to the securities it evaluates, just as it and other ratings agencies did to help us get into the economic mess of 2008. “Of half of the deals that it rated since last September,” according to Nathaniel Popper of the Times, “S&P has given at least a portion of the deal a higher rating than the other agencies rating the same deals.” As a result, it is no surprise that Standard & Poor’s has tripled its market share in the first half of 2013. If you want an example of what I was talking about by “keeping an eye on our institutions,” these stories are it.

Men in black

Several years ago in this space, I expressed concern about the spread of SWAT teams. But I had no idea how absurd—and dangerous—the situation had become until, thanks to a new book by Radley Balko, The Rise of the Warrior Cop, excerpted in the Journal, I learned that by 2005, 80 percent of towns between 25,000 and 50,000 people have SWAT teams that collectively conducted approximately 50,000 raids nationwide.

In one such raid described by Balko, Matthew David Stewart of Ogden, Utah, woke up one night to the sound of his front door being battered down. Thinking he must be under attack by criminals, he grabbed his gun. In the resulting exchange of shots, Stewart was hit twice, as were six officers, including one who was killed. The only evidence of dangerous crime that police found in Stewart’s home consisted of sixteen small marijuana plants. While Stewart was in jail awaiting trial, he hanged himself.

SWAT-ing flies

Just a day after I wrote the previous item, the latest issue of my hometown paper, the Charleston Gazette, arrived in the mail. It described how a West Virginia SWAT team had killed a disabled man named Richard Kohler, whose only alleged crime was “giving away pills prescribed to him in exchange for stolen items.” The police said that when they pried open his door at 6:05 in the morning, he aimed a rifle at them. The only problem with this explanation is that the outside of the door was riddled with bullet holes. The police did not even have an arrest warrant for Kohler. All they had was a search warrant. Kohler’s daughter described him as a nonviolent man with no criminal record, who required a cane to get around and needed help getting out of bed.

By the way, did you know that, according to Balko, police departments across the country compete for federal anti-drug grants? As a result, it’s in their financial interest to pursue the most aggressive drug arrests and seizures possible. No wonder they’re calling in the SWAT for small-time drug crimes.

Lifestyles of the rich and the chic

I try to keep you abreast of life among the 1 percent by faithfully following the Mansion section of the Journal and the Styles section of the Times. The latest Mansion section features “the rise of young buyers of high end real-estate.” One is Chelsea Clinton—she and her husband are paying $10 million for a “full-floor Manhattan condo.” The latest news from Styles concerns the recent menswear show in Milan. The story features a three-quarter-page photograph of a row of male models wearing “head to toe floral prints” from “Frida Giannini’s spring 2014 collection for Gucci.”

2013 narrowly averted in 1944

In 2005, I wrote a book about how the 1940 Republican presidential nominee Wendell Willkie’s support for the draft in 1940 and for Lend-Lease in 1941 was essential to Franklin Delano Roosevelt’s effort to prepare the country for World War II and to enable Britain, and then Russia, to hold out until we could get in. I wrote the book because I had become frustrated that so few people knew this thrilling story of how two opposed political leaders had worked together at a crucial time in our history. Now I’m delighted to report that three books with a similar message have all appeared this summer. It’s good to know that more and more people will learn this story at a time when the country needs to hear it.

But there was one issue on which I thank providence Willkie refused to embrace Roosevelt’s position. In 1944, FDR wanted Willkie to join him, possibly as a vice presidential candidate, in a new party that would bring all liberals together and leave the conservatives on the other side. If Willkie had agreed, we would have had a vice presidential candidate who died just a month before the election, as Willkie did—and of course a president who would die, as Roosevelt did, seven months later. And more significantly, for many years to come, we would not have had several moderate conservatives among the Democrats and several moderate liberals among the Republicans to negotiate the compromises essential to making democracy work. In other words, we would have found ourselves, seventy years sooner, in the polarized mess we’re in today.

Charles Peters is the founding editor of the Washington Monthly and the author of a new book on Lyndon B. Johnson published by Times Books.

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