Barry Ritholtz Quotes

In 1968, Fitzgerald reported a $2.3 billion cost overrun in the Lockheed C-5 aircraft program. As a congressional witness before the Joint Economic Committee, he rejected the advice of Air Force officials to not tell the truth and testified with candor and transparency about billions of dollars in avionics program cost overruns and other technical problems enormously embarrassing the Defense Department and the Nixon Administration procurement practices. In response to Mr. Fitzgerald’s testimony, President Richard M. Nixon directed that he be fired. See {636749}.

He had already decided to save General Motors which was much larger and more critical to the national economy. The normal capitalistic broken down and there were no private firms that were willing to invest, control and continue the companies at any price. There were 1 million immediate jobs at stake with GM plus the collapse of the American Auto Industry including dealers and suppliers. With Chrysler, there were only 300,000 immediate jobs at stake. Ironically, one of the major reasons for trying to save both companies was the fact that Summers team had discovered that the companies were very badly managed. If the bailout could be leveraged to force radical management change and reform, the chances of success would have been much greater than if the companies had been well managed but were still losing money rapidly. The policy decision was brilliantly successful. The reformed auto companies quickly became profitable, and the taxpayer loans were paid back early with interest to and profits to the taxpayers. All those jobs and an iconic American industry not only were preserved but became very profitable and strong and in the final analysis, it did not cost the taxpayers even one dollar. Ford was in less trouble, but if the other two companies failed, the Ford suppliers would mostly fail, and Ford also would have gone down.

He was referring to the famous Eisenhower quotation of 1961. See {641114}.

Fogleman came out of retirement at the request of Air Force General Bernard Schriever, Commander of Air Force Systems Command, which was responsible for acquiring all missiles. He oversaw 40 percent of the Air Force budget most of which was spend on procurement contracts with companies. Schreiver wanted an experienced business man to oversee his procurement. In 1964 Foglemen volunteered to start up and train the procurement department for Sargent Shriver, President Johnson’s designee to direct the War on Poverty. 210 Job Corps Centers had to be constructed and corporations hired to operate the largest ones—all within a two year span. Fogleman faced the same problem where the Federal officials responsible for the Job Corp had very little business experience. He was very successful and persuaded Shriver and his key staff to hire a cadre of people with business experience and pay them at the high end of the Federal pay scale. The unit met the President’s deadline and obtained great prices, making exemplary use of taxpayer’s money. Fogleman retired for the third time, and after a few years the Job Corps was transferred to the Labor Department and the typical government procurement staff and norms began to operate. Forlleman and General Schreiber were unable to institutionalize Fogleman’s methods and after the General retired, the command that had been so effective for a few years, reverted to standard DOD procurement. See {634893} for a quotation of one of Fogleman’s trainees on military procurement.

This warning was a decade before the Meltdown of 2008, but was not heeded by any of the politicians. As a result a number of the companies that made all those risky decisions assumed that if something went terribly wrong the government would not let them fail. Unfortunately, they were right and the taxpayers spent billions to prevent companies from failing. After the meltdown all the politicians vowed to end the too big to fail concept, but while some improvements were made, the Congress could not come to agreement, and the markets and a number of companies think that they are still too big to fail. This is particularly true for Defense Contractors where the government has and probably will in the future, protect irresponsible companies from failure if they are the only company that makes needed weapons and other equipment.

Geithner, the Treasury Secretary immediately after the Meltdown of 2008, facing complete collapse of our financial system, among other ameliorations, advocated and implemented many subsidies to bail out the banks most of whom had been greedy, foolish and often dishonest. He even allowed banks to use taxpayer money to pay bonuses to Bank executives who had brought the bank to ruin being a cause of the crisis. However, the banks not only survived but recovered and made huge profits while many of the taxpayers whose funds were used to help the banks were still struggling to make ends meet and it was they who received little, if any, government assistant.

The relationship between the Embassy and the contractor was so twisted and corrupt that the contractor’s on site manager in Iraq threatened to have Richter killed if he continued to probe into the documents that would incriminate them. In the midst of a war zone where the contractor was responsible for providing armed security for the State department personnel—see the graphic—including Richter, it would have been very easy to arrange. Blackwater then arranged with the embassy to have Richter and another auditor/investigator expelled from Iraq so that they could not complete their entire investigation. The State Department began a complete investigation years later when the press discovered this memo and divulged it.

The Pentagon has the largest budget of any operational government department and makes the most procurements of government agencies. So even if their proportional share of waste were the same as all the other agencies, it would appear, there would be more examples for people to see from the Pentagon. Unfortunately the proportion is very different with a much higher proportion of no bid (sole source contracts). a much higher proporton of moneys spent for which they could not even account. far fewer checks on the procurement officials. The armed services are not all alike howevever. The Army was generally much better than the other services except during the Iraq War reconstruction. The Navy however was by far the worst of the armed services in terms of waste and avoiding the checks and balances of procurement reviews and procedures.

There was a financial crisis in the country and the world when highly risky home mortgage loans defaulted leaving investors and speculators in mortgage-backed securities in a poor position. The investors had been reaping very high interest rates for their risky investments, but this was the first time that this form of risky investment had failed. The investors, of course were looking for a bailout from government. When the Bush administration failed to bail out investment bank, Lehman, there was a panic and the banking system of the country and much of the world froze up. Bush and his Secretary reversed their bailout of speculators policy and provided various assistants and bailouts to the very bankers and other investors who had caused the economic meltdown. The policy was continued by the Obama administration although the bailouts were just as distasteful to Obama as they were to Bush, but most economists agree that the two presidents very distasteful and unpopular bailout actions probably saved the nation from a massive depression. After being bailed out by the taxpayers, the Bankers then paid themselves exorbitant bonuses while the results of their management put 10 percent of the country out of work.

While Stockman and some others believe that the Meltdown of 2008 would have “run its course” if the government didn’t bail out financial institutions, the very conservative Republican Secretary of the Treasure Paulson and the Chairman of the Federal Reserve told President Bush, Congress, and incoming President Obama that if there was not a quick bailout, the economy of the nation would crash with a depression resulting as bad if not worse of the Hoover Depression of 1929. Bush and Obama and the majority of Congress agreed and took action to avoid that. There is no way of knowing whether they were right or Stockman was. However, the people with the responsibility of governing and safeguarding the nation clearly did not want to take a chance that the advocates of no action might be wrong.