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Sunday, April 15, 2007

The Song Remains the Same

The PBS news magazine NOW ran a story (#1) April 13, 2007 about SEC investigator Gary Aguirre who was abrubtly fired by the SEC after he informed his boss he was going to subpoena John Mack regarding an investigation into fraud at the hedge fund Pequot Capital. The investigation involved a deal in 2001 that netted Pequot Capital $18 million but may have involved inside information about the company whose stock was in play. Mack had been CEO of MorganStanley at the time of the events being investigated and Aguirre wanted to see what information Mack might have provided. His boss told him he could not approve a subpoena of Mack because of his political profile. Mack is a "Ranger" level fundraiser within the Republican Party.

Just weeks before being fired, Aguirre was given a top job evaluation which cited his performance on the Pequot case. After the firing, agency officials mentioned "personality issues", etc.

Sound familiar? It should. That is the exact same pattern seen with the dismissal of eight United States Attorneys.

Think this is just another Democratic Party witch hunt? Republican Senator Arlen Spector and Charles Grassley of Iowa have both publicly criticized the SEC's handling of the case. When interviewed by a MarketWatch columnist, Spector said:

"He was doing outstanding work -- whatever language that was -- and then they manufactured a re-evaluation as the basis for firing him. Totally, totally unjustified." He said the SEC's actions have "an overtone of a coverup." (#1)

The ties to the Republican Party are less concerning than the fact that the SEC appeared reluctant to investigate a leading Wall Street executive involving issues central to its mission in ensuring integrity in the markets. Mack was not necessarily the focus of Aguirre's investigation, but someone with likely insight. Mack was cozy enough with Pequot Capital that he became its CEO for a month in 2005 when he temporarily left MorganStanley in a power struggle with a long-time competitor. In essence, the circumstances of Aguirre's dismissal illustrate the danger of a crucial regulatory agency being "captured" by the very industry it is charged with regulating.

The NOW story tied the problems with proper investigations of Wall Street firms into the larger problem of the shenanigans that could be going on with hedge funds, using the failure of Amaranth Advisors as a case in point. The story also indicated that the majority of political contributions from hedge fund operators have been going to Democratic politicians, with Connecticut Senator Christopher Dodd one of the most notable examples. Watch this space… Money is a bi-partisan, equal opportunity corruptor.


Paul Wolfowitz, one of the lead architects of the colossal disaster in Iraq, was rewarded for his efforts by being appointed President of the World Bank. The irony starts right there. The World Bank is an international organization of financial experts dominated by the United States aimed at providing loans and financial expertise to developing nations as part of a larger goal of improving the world via economic development. Paul Wolfowitz has spent his entire working career working in an around government and has absolutely no experience in hands-on economic development or banking at the micro or macro level. In other words, Wolfowitz is another Phil Graham, a conservative who has made a career out from tying his wagon to those who bash the ability of government or public agencies to accomplish ANYTHING productive yet has done NOTHING in his career except work in government to prove his theory correct.

Wolfowitz is now facing controversy over alleged favoritism over pay raises granted to his girlfriend who worked within the World Bank but was reassigned to a position inside the US State Department ostensibly to avoid any appearance of a conflict of interest from working in a chain of command to her boyfriend. The only problems are that

a) she's still on the World Bank's payroll
b) she received a raise to a salary of $193,000
c) she now makes more than Condoleeza Rice, who "only" makes $186,000

Wolfowitz claims he offered to recuse himself from any decisions about her compensation and career path to avoid any conflict of interest and that the World Bank board rejected the request and told him to solve it by giving her an external assignment. In a comment provided to the Financial Times, a World Bank official stated:

…the terms of Ms Riza's secondment were approved by the ethics committee of the board – not by Mr Wolfowitz. He said the terms of the assignment "recognised her professional contribution and career opportunities", which might be impaired by her departure to the State Department. (#3)

Wow. Just take a moment to savor the cynicism in that comment.

If working for the State Department in the Bush Administration, which has done so much to foster peace and economic development in the world, is such a career downer, then why did she take the job? Does she have no moral compass guiding her in her career choices? I guess $193,000 can be a pretty effective muzzle on the neo-conservative conscience.

Sound familiar? It should. This describes the cynicism of virtually every Bush Administration staffer, many whom cam from anti-government think tanks yet had no qualms about going into the belly of the beast and collecting a paycheck.

In the resulting furor within the World Bank employee ranks and the larger public, great dissatisfaction is coming to light about Wolfowitz's management style. After taking over the helm at the World Bank, Wolfowitz brought in two long time colleagues as aids and immediately blocked out everyone else in the institution as he went about implementing his grand ideas.

Sound familiar? It should. This is exactly the same management style from the same man that helped produce the Iraq war.

The neo-conservative song remains the same. For the last six years, neo-conservatives have simultaneously cited government as the root of all evil while clamoring for control of every lever of power and abusing that power to screw up every situation they touched while enriching their friends at the expense of the public and world at large. The song remains the same, indeed.


#1) http://www.pbs.org/now/shows/315/index.html

#2) http://www.marketwatch.com/News/Story/sec-afraid-elite-wall-street/story.aspx?guid=%7B61D5EB54-C4F4-48C3-8641-8EAB2C088D26%7D

#3) http://www.msnbc.msn.com/id/17956779/