Rumsfeld’s biggest unknown
By Joshua Spivak The opinions expressed are his own.
The knives are out in Donald Rumsfeld’s new memoir, Known and Unknown. In defense of his long public service career and the war in Iraq and Afghanistan, the man who was both the youngest and oldest Defense Secretary clearly believes that a good offense is the best strategy.
While the book is receiving press for the intra-cabinet fights and for Rumsfeld cherry-picking his facts, it ends up being a useful and needed work: In eviscerating fellow members of President George W. Bush’s national security team, Rumsfeld raises questions about how the most critical parts of the executive branch operate.
With the relentlessly negative portrayals of political and military figures and constant complaints about the press and the legislature, it is not obvious that Rumsfeld is looking to make a larger point other than defending his tenure and slashing at adversaries. And slash he does — among the many, many bold-faced names who receive unwelcome shout-outs are long-time Rumsfeld foe George H.W. Bush, Colin Powell, Condoleezza Rice, John McCain, Al Gore (he even takes an early whack at Gore’s father), Jerry Bremer, Eric Shinseki, and, in a golden oldies moment, Nixon’s counsel John Ehrlichman. His assessment of Ehrlichman may be the best line in the book, noting,“Certainty without power can be interesting, and even amusing. Certainty with power can be dangerous.”
What gives some of these criticisms weight is Rumsfeld’s highlighting of flawed presidential operations. He starts with citing mismanagement with the one president who he greatly respects and admires, Gerald Ford. Rumsfeld keeps coming back to the mismanagement theme. At the end of his tenure in the Bush Administration, he notes: “After five years back in government, wrestling with natural and man-made disasters as well as two wars, it became clear to me that our government institutions were proving inadequate to the challenges of the twenty-first century and the information age.”
The critiques multiply with a series of attacks on the Army leadership, the intelligence community, on Colin Powell and the State Department. Unfortunately, the question of what are the proper roles of the State and Defense departments in a modern war and its aftermath are not answered by Rumsfeld in this book. His complaints, though, don’t seem that much different from the usual battles that many Defense and State Departments wage in other administrations.
Rumsfeld’s attacks on Rice and her tenure as National Security Advisor are of another order. Rumsfeld argues that Rice fundamentally misconstrued the position of the National Security Agency, not understanding that her job was not to “issue orders, provide guidance, or give tasks to combat commanders.” In Rumsfeld’s view, Rice injected herself into policy rather than being an organizer and neutral arbitrator.
Michael Lewis’ Big Short an unsettling experience
Henry Paulson didn’t see it coming. Nor did Timothy Geithner foresee the meltdown of the financial markets. According to Standard & Poor’s President Deven Sharma, testifying before Congress in the fall of 2008: “Virtually no one – be they homeowners, financial institutions, ratings agencies, regulators, or investors – anticipated what is occurring.”
Why? Perhaps “it took a certain kind of person to see the ugly facts and react to them – to discern, in the profile of the beautiful young lady, the face of an old witch,” says Michael Lewis, author of numerous best-sellers including 1980s Wall Street memoir Liar’s Poker and now The Big Short: Inside the Doomsday Machine (W.W. Norton, $27.95).
Lewis’ new volume is an entertaining and very edifying look at several such insightful people — the tiny handful of investors “for whom the trade became an obsession.” These were unusual, “almost by definition odd” folks, soon to make big money on the cataclysm: There is Steve Eisman, the former Oppenheimer analyst who regularly demonstrated a prodigious “talent for offending people,” notably in a tendency to trash subprime originators as early as 1997.
Next up is Michael Burry, a compulsive, “one-eyed money manager,” a man profoundly uncomfortable around other people who could only work alone in his office with the door closed and the shades drawn. Poring over obscure corporate documents, Burry saw the insanity in the financial markets and in 2005 began prodding big Wall Street firms to offer credit default swaps, or financial insurance policies, against the failure of mortgage-backed derivatives. Finally, there’s the “weirdly like-minded” threesome who made up the money-management outfit they called Cornwall Capital Management. They were “sweet-natured, disorganized, inquisitive” –”the kind of guys who might turn up at their fifteenth high school reunions with surprising facial hair and a complicated life story.”
This band-of-outsiders conceit is familiar — reminiscent of everything from Huckleberry Finn to The Dirty Dozen – and if The Big Short were no more than a collection of such profiles, it would satisfy many readers. But Lewis’ volume has lots more to offer thanks to its clear explication of exotic derivatives and meltdown events.
Much of this may be familiar to regular readers of the financial press, and may remind some of Wall Street Journal writer Gregory Zuckerman’s much lauded account of hedge-fund trader John Paulson’s $15 billion coup, The Greatest Trade Ever. But even these readers are likely to admire the lucidity of Lewis’ book. Here, for example, is how Lewis explains the two financial instruments at the heart of the mess. The subprime mortgage-bond-backed collateralized debt obligation, or CDO, was “so opaque and complex that it would remain forever misunderstood by investors and rating agencies.”
It was a bunch of mortgage bonds, often rated triple-B, used to construct an entirely new tower of bonds, which ratings firms like Moody’s and Standard & Poor’s were persuaded to rate triple-A. The CDO, which hid huge risks via obfuscation, “was a machine that turned lead into gold” for Wall Street, writes Lewis. The credit default swap, meanwhile, was effectively an insurance policy with semiannual premium payments – but also an asymmetric bet. As in roulette, “the most you could lose were the chips you put on the table; but if your number came up you made thirty, forty, even fifty times your money.”
Anyone know how to get in touch with Cornwall Capital? I’m really impressed by their methods and I’m looking into establishing my own derivative based hedgefund.
“Certainty with power can be dangerous.”
Said Rumsfeld??? But not about anyone in the Bush administration, certainly not Bush or himself.
I think that gives you an insight into his success in bureaucratic warfare.
A normally crippling lack of self awareness, a total absence of self criticism, a shameless disregard of facts leaves reasonable people lost for words. The war is then won.
Of course, the first thing you need is an immensely priveleged start in life. For most of us such behaviour would lead to a psychiatric diagnosis.