The various revelations in Ron Suskind's book The Price of Loyalty are based largely on a trove of 19,000 documents that former Treasury Secretary Paul O'Neill gave him. Some have criticized Suskind for striking a Faustian bargain in which he accepted at face value O'Neill's often comically outsized self-regard in exchange for the information O'Neill was in a position to provide about the inner workings of the Bush White House (which might be summed up by the formula, "Crude Political Calculation + Discipline = Success"). But whatever his personal failings and shortcomings as Treasury secretary (some of them previously documented in Chatterbox's "O'Neill Death Watch"), O'Neill is a smart and principled man whose blunt storytelling, supplemented by Suskind's independent reporting, provides what is by far the most vivid and valuable accounting of this administration. And unlike the typical White House memoirist, O'Neill made sure the public would have the documents to back up his description of what he saw.
Suskind has now begun the process of putting those documents online. Today he has posted 20 documents touching on some of his book's more striking revelations. He plans to release roughly the same number of documents on a weekly basis for some time to come. Suskind says that this trove—a sort of "The Smoking Gun" for policy wonks—will eventually include many newsworthy documents that, due to constraints of time and narrative, he failed to use in his 328-page book. As with these initial 20 documents, they will cover all aspects of government policy, not just economic matters.
One document that seems likely to become news (even though the book's allusions to it have thus far attracted little notice) is a memo by Alan Greenspan, chairman of the Federal Reserve Board, excoriating corporate governance in America. (It was written March 4, 2002, in response to the Enron implosion.) Many of Greenspan's complaints—expressed, for once, in plain English—would not be out of place in The Nation. To wit:
CEOs, under increasing pressure from the investment community to meet elevated expectations, in too many instances have been drawn to accounting devices whose sole purpose is arguably to obscure potential adverse results.
Greenspan says that Generally Accepted Accounting Principles, or GAAP, which Treasury Secretary Lawrence Summers in 1998 praised as "the single most important innovation shaping [America's] capital market," are a sham:
So long as the corporate duty to disclose is viewed as limited to conforming to GAAP, disclosures will remain inadequate. … [A]bsent a fundamental change in the perception of the duty to disclose, firms will have incentives to continue to game the accounting system.
Greenspan also discusses the harmful effects of stock options:
The Federal Reserve staff estimates that the substitution of option grants for cash compensation added about 2-1/2 percentage points to reported annual growth in earnings of our larger corporations between 1995 and 2000. One must assume that this led to some misallocation of the nation's capital assets especially in the high-tech sector.
[C]hanges in critical areas of governance to align CEO interests more closely with those of shareholders in our judgment are essential and, indeed, overdue. The stock market has begun to place a premium on corporate disclosures that inspire trust. Government policy can, and should, reinforce this powerful market incentive.
Judging from Greenspan's tone, the Corporate Fraud Accountability Act of 2002, signed into law a few months after he wrote this memo, does not go nearly as far as he'd like. It established a new accounting oversight board, but did not, for instance, require corporate expensing of stock options.
Other highlights from Suskind's documents:
- White House budget director Mitch Daniels stating confidently in a February 2001 memo that "the president's budget is so fiscally conservative that the government will be able to retire all of the roughly $2 trillion in debt that is financially practicable to retire by 2011. … [A]fter 2007, projected surpluses will be larger than the annual amount of maturing debt." The Congressional Budget Office currently puts the federal budget deficit at $375 billion and projects a deficit of $162 billion in 2011.
- Environmental Protection Agency chief Christine Todd Whitman making a last-ditch plea in March 2001 that Bush "indicate that you are exploring how to reduce U.S. Greenhouse gas emissions internally and will continue to do so no matter what else transpires. Mr. President, this is a credibility issue (global warming) for the U.S. in the international Community." Bush brushed her off, pledged not to regulate carbon emissions, and papered over his inaction with a voluntary greenhouse program that he no longer even bothers trying to tout. (Indeed, his State of the Union didn't mention the words "environment," "pollution," "natural resources," "clean air," or "clean water" at all.)
- National Economic Council chairman Larry Lindsay picking a fight with O'Neill (about Treasury estimates on the proposed tax cut) a mere five days after Bush's swearing-in. Both men would be pushed out within two years.
Chatterbox will be returning to the Suskind documents frequently in weeks to come. This fishing expedition's just getting started!
[Update, Feb. 6: Treasury Secretary John Snow informed Congress today that some of the documents in Suskind's possession "contain classified information" and that Treasury shouldn't have cleared these for O'Neill to haul off. (According to Suskind, none of the documents is stamped "classified.") In the Feb. 7 Washington Post, Dana Milbank and Lucy Shackelford have spokeswoman Anne Kolton saying that no steps will be taken to prevent the documents' publication or to punish O'Neill or Suskind. (Kolton, incidentally, is not the Treasury spokeswoman who in a February 2001 memo urged O'Neill to stay "monotonously on-message." That was Michele Davis.) Suskind told Milbank and Shackelford, "I have no intentions to publish anything that would compromise national security." Apparently none of the classified information to which Snow refers appears in the documents Suskind has posted thus far.]