Since March of 2009, when the Obama Administration made it known to the Pentagon that Bush Administration language such as “global war on terror” would no longer be used, the Administration has gone to great lengths to be the “anti-Bush” on all matters, especially those involving issues of national security. While credit should be given to the Obama Administration for more troops and more drone attacks in Afghanistan and western Pakistan, the President makes these decisions with great difficulty. President Obama is willing to attack and kill Al Qaeda overseas, but he wants them to have all the rights of U.S. citizens if they are captured in this country. This makes no sense. Is it because of the pressure he is getting from the left wing of his Party? Is it because adoption of Bush Administration policies is repugnant to him? Is it because he would rather be Head-of-State instead of Commander-In-Chief? After all, no matter what you may think of the Bush Administration, it is undeniable that no domestic attacks followed the 9/11 attacks in the remaining seven years of his presidency; and it is possible and even probable that the policies put in place by the Bush Administration and the culture and intensity of the effort to fight the war on terror are what kept us safe.

President Obama has assumed responsibility for the “system failure” that allowed Abdulmutallab to board Northwest flight 253 to Detroit, but he still has given no clear signal that he understands the nature of the threat we face. A lack of leadership on his part in this fight was evident up to and during the Fort Hood massacre and again up to and in the aftermath of the “underpants bomber” attack. The President has filled his plate with massive domestic initiatives and a lot of travel to improve relations with nations around the world. He has been on a crusade of sorts to have all of humanity again love the United States and has relied on his own charisma to achieve this goal. His efforts to set the right tone and commitment as regards the fight with Al Qaeda have been benign at best.

While he took a step in the right direction on Thursday to characterize the threat in a way most Americans believe and understand, we will have to see whether President Obama backs his words with actions. As former New York Mayor Rudy Giuliani said, “The reality is, whether he likes it or not, we are at war with terrorists. They haven’t forgotten it. And if he recognizes we’re at war with terror, a lot of things follow from that. Are we really going to treat it as a war or is it just rhetoric?”

The Obama administration will need to decide whether they want to prosecute “suspects” after terror attacks (as we did in the 1993 bombing of the World Trade Center) or whether instead they will harness all resources at our nation’s disposal to uncover these plots before they happen, kill the enemy who would harm us, and “protect and defend” the American people. It is not enough to outlast our terrorist adversaries; they must be stopped and destroyed. This cannot be an exercise in criminal justice. It is a matter of national priority. We face huge challenges at home. We have out-of-control government spending and a weak and fragile economy. But none of that really matters, if we are not safe and protected against those who would do us harm.

While an earlier column for CenterMovement.org indicated that former Vice President Cheney needs to be reminded that seriousness of intent does not pivot on semantics, President Obama needs to know that words alone are not sufficient for the effort required to defend the United States and destroy her enemies. The most important job the President has is that of Commander-in-Chief, to defend and protect both the Constitution and the American people. What the Christmas Day attack shows is that this administration has not addressed this threat with the sufficient urgency and commitment it deserves. Critics of the Administration point out that while there is a level of incompetence in the handling of this terrorist attack (as in DHS Secretary Napolitano saying “the system worked”), there is equal concern that the Administration lacks sufficient comprehension of the threat. As Charles Krauthammer notes, “Obama goes abroad and pledges to cleanse America of its post-9/11 counterterrorist sins. Hence, Guantanamo will close, CIA interrogators will face a special prosecutor, and Khalid Sheik Mohammed will bask in a civilian trial in New York…a trifecta of political correctness and image management.” This is not a serious way to wage war on a group who declared jihad in Osama bin Laden’s 1998 fatwa against the United States. The war was declared not just because we had military bases in Saudi Arabia (which we no longer do) or because of the sanctions against Iraq (which obviously are no longer in place) but because the United States represents “modernity with its individual liberty, social equality (especially for women) and profound tolerance (religious, sexual, philosophical)”, observes Krauthammer. The Obama administration’s desire to fight this battle as a criminal pursuit is fraught with problems. Umar Farouk Abdulmutallab, the would-be “underpants” bomber had reportedly begun to talk about his training and his contacts with Al Qaeda, but stopped once he was “Miranda’ized” by Eric Holder’s Justice Department and “lawyered” up. He now sits in a federal prison facility near Detroit. The United States is not able to extract any further information from him. We do not know whether there are parallel threats underway. The Administration may pat itself on the back and say that our treatment of Abdulmutallab demonstrates how fair and just the American judicial system is, but does anyone really believe that our enemies care?

Our humane treatment of these terrorists on our soil is not going to prevent them from continuing to plot to attack us. Al Qaeda does not care about justice. They don’t care that a law enforcement approach may show America to be “the shining city upon a hill”. If they did, would they have beheaded Daniel Pearl? Would they have shot and hung the contractors on the bridge outside Fallujah, Iraq? Would they continue with attacks in Iraq and Afghanistan that harm not only American military personnel, but also innocent men, women and children? Al Qaeda doesn’t care if America reasserts its moral authority.

Al Qaeda has declared war on the United States and on its values. They mean to destroy us. A war on terrorism will be long. It will be difficult. It is the existential struggle of our time. While President Obama may wish the war is over, and may be shocked and angered by the wake-up call his administration received on Christmas day, the facts are right in front of us. Al Qaeda is still at war with us. And the new front on the war on terror is Yemen.

Halliburton/KBR had a revolving door for Dick Cheney that served both of them well.  Their problem is that Cheney as Vice-President was very visible, very angry, and very polarizing.  He was also the only one in the door. Goldman Sachs also has a revolving door.  It’s harder to personalize, because there are so many people using it.  None of them has quite the visibility of Mr. Cheney, nor do they speak out so publicly and with such righteous indignation.  They’re much too shrewd for that.  Goldman’s door cycles brilliant and obsessively hard-working people between the company and the agencies supposed to be regulating it.   Although many of them are Masters of the Masters of the Universe, most are rather inconspicuous, even anonymous to the outside world. But their conflicts of interest are huge.  The consequences from acting on them can be even larger, and all the more lasting because the field of finance is so mysterious and misunderstood.  It lacks the concreteness of an oil well, or even a contract in Iraq.

Halliburton’s story helps understand the magnitude – or at least the (high) lower limit – of the mischief conflicts of interest can create when they’re not sufficiently addressed and restrained.  Cheney’s first adult job in the private for-profit sector was as CEO of Halliburton, a Fortune 500 Company.  As a five-time draft deferrer, Cheney wouldn’t have been everyone’s first choice as Bush 41’s Secretary of Defense, but Halliburton certainly found his Secretarial connections attractive.  The corporation was an energy (oil services) behemoth that also provided construction and military support services.  Defense, in brief, could be its ticket to fabulous and continuous lunches.  In 1995, Cheney’s first year as CEO, Halliburton leaped from 73^rd to 18^th biggest contractor for the Pentagon.

Halliburton lucked out when Cheney became Bush 43’s Vice-President and W invaded Iraq. The combination of war and Cheney meant billions of more dollars of contracts for Halliburton subsidiary KBR.  One contract was particularly controversial because it was won without any competitive bidding: regulations were suspended due to “emergency” conditions before the invasion of Iraq.  This year, Halliburton is ranked #141 in the Fortune 500.  It would have been even higher had KBR not been spun off in 2007.

Vice-President Dick Cheney and his wife, Lynne, also did well.  They reported income of $36,086,635 for 2000, the year he resigned from Halliburton.  In 2007, back in government with a VP’s salary of $212,208, their income totaled  $2,528,068.  (These are the last figures readily available on the internet: by the time tax returns were due, the Cheneys were back in the private sector, where IRS matters remain largely …well, private.)

In the context of a banking crisis still so acute that 149 banks failed from 2008 through November 13, 2009, Goldman Sachs was ranked #40 in the Fortune 500 – more than 100 points higher than Halliburton.  Goldman Sachs is clearly too big to fail.  But why is Goldman Sachs often called “Government Sachs” and how much is its success due to financial savvy and how much to working the revolving door to and from Washington?

Goldman Sachs’ website starts kind of warm and fuzzy.  The first page you see is entitled “Our Firm”, with a picture of an attractive African-American woman who looks reassuringly empathetic. “About Us” – “At a Glance” — shows an equally attractive Asian man, looking up as if he is questing and questioning the universe – or maybe just our portfolios (if we are rich enough to have them there). Beneath him we learn, in large and gentle blue font, that

Goldman Sachs Group, Inc. is a leading global financial services firm providing investment banking, securities and investment management services to a substantial and diversified client base that includes corporations, financial institutions, governments and high-net-worth individuals. Founded in 1869, the firm is headquartered in New York and maintains offices in London, Frankfurt, Tokyo, Hong Kong and other major financial centers around the world.

I note the inclusion of “government” in the client base.  Goldman notes that its “activities are divided into three segments” – “Investment Banking”, “ Trading and Principal Investments”, and “Asset Management and Security Services”. These “segments” come not just with verbal descriptions but with the bar graphs obligatory in financial discourse.  Despite the calming grays and blue and the perfect grammar, this part of the second segment moves into the mysterious, with muscles flexed:  the “we” of Goldman  “take proprietary positions through market making in, trading of and investing in fixed income and equity products, currencies, commodities and derivatives on these products. In addition, we engage in market-making and specialist activities on equities and options exchanges.”  Clearly, “we” are very, very smart – and trained in matters of High Finance well beyond the reach of common mortals like me.  Goldman Sachs is well named.  It’s the gold standard of finance, worldwide.  And it sacks anyone who’s not just super-smart but super-driven, too.

Goldman Sachs is so smart that it dumped its mortgage-backed securities before the crash.  Goldman Sachs is so smart that its profits were $3.44 billion for the third quarter of this year, a quarter when unemployment continued to rise and other banks continued to fall.

The most important of its assets may not even be included in the Fortune 500 data.  It may not even be its brilliant and driven employees with all their human capital. Perhaps it’s the revolving door “Government Sachs” has established in exchanging men of talent with Washington.    Halliburton’s revolving door dates back to LBJ; Goldman’s goes well past him to Sidney Weinberg, FDR and WWII.  See Huffington Post at http://www.huffingtonpost.com/2009/06/02/government-sachs-goldmans_n_210561.html for “relation chart” designed to baffle and a list and slide show designed to disturb.  (By the way, the people in the slide show are all men – hence my pronoun above.  They’re also all white.)

When the real estate bubble burst in 2007, the stock market crashed and credit seized up, afflicted, inter alia, by those pesky mark-to-market rules.  Leverage with credit default swaps and mortgage-backed security had worked so positively in that stretch of good times.  But when things went south, leverage made them go well past the equator.  Risk, it turns out, still existed.  It was still real, systemically so.

In an advanced economy like ours, no credit means no production, and the Government rushed in to unseize credit.  In a draft document less than 3 pages long (the medical reform bill that just passed the House weighs in at 1990), President Bush proposed giving Treasury Secretary Hank Paulson essential carte blanche to rescue banks with the first tranch of the $700 billion TARP fund. In the last meaningful bi-partisan legislation seen in this country, Congress overwhelmingly approved the bank bailout.

Just who is Hank Paulson?  Someone who started working for Goldman in 1974 and went right to the top: he was CEO from 1999 to 2006. In transition to government, Paulson divested himself of his 3.23 million Goldman shares.  In office, Paulson anointed  Neel Kashkari to oversee TARP fund dispensations. Kashkari was a technology investment banker from Goldman from 2004 to 2006.  Kashkari appointed Reuben Jeffrey to the post of interim chief investment office for the bailout.  Jeffrey joined Goldman in 1983 and was an executive there for 18 years.  When Kashkari was criticized for not providing sufficient oversight of the money he disbursed, he deployed the venerable “funds are fungible” line and said that oversight would never be sufficient because of this old saw.

Team Paulson-Kashkari-Jeffrey dispensed $10 billion of their funds to Goldman.  Just what you’d expect from Republicans, right?  Keep reading.

Democrat Obama replaced Treasury Secretary Paulson with Tim Geithner, tapped from the New York Federal Reserve.  Geithner wasn’t quite big-brained enough to have worked directly for Goldman – admirable as he is for handling his own tax returns, he’d lacked the acumen to over-ride the apparent dictates of Turbo Tax, but he ramped up the collective office IQ by bringing in several assistants from Goldman and making one of them a top aide. In earlier days at the Treasury, Geithner had been mentored by Robert Rubin, Treasury Secretary under Bill Clinton and Co-Chair of Goldman Sachs from 1990 to 1992.   Rubin, you may recall, also earned his stripes –or were they spots? –  as head of  CitiGroup.

Geithner had already helped Goldman as President of the Federal Reserve Bank of New York. He let competitor Lehman Brothers go under – arguably at great cost to the country.  With former Goldman chairman Stephen Friedman the chairman of his board of directors, he also got Goldman a much better deal from AIG: 100% payment for default swaps rather than the 40% the insurance once-giant originally proposed.  William Dudley replaced Geithner as President of the NY Fed.  He was Chief Economist and Advisory Director at Goldman from 1986 to 2007.  Looks like Republicans and Democrats both love Goldman once they enter the Beltway.

Right before a Presidential election that didn’t really change its access to power, Goldman Sachs changed its status from an investment bank to a commercial bank holding company.  Why? “While accelerated by market sentiment, our decision to be regulated by the Federal Reserve is based on the recognition that such regulation provides its members with full prudential supervision and access to permanent liquidity and funding,” GS head Lloyd C. Blankfein explained. Ah, “access”.  Nice to have it economically as well as politically.

As already noted, Goldman also got quick access to temporary liquidity and funding: $10 billion from the Paulson-Friedman-Jeffrey Treasury TARP Funds.  “Full prudential supervision”, on the other hand, was not so attractive, and it extended past borrowing cheap from the Fed to borrowing quick from the Treasury.  Turns out, the government was going to regulate bonuses for TARP fund recipients.  The horror!  The unmitigated moxie to tell the Masters of the Masters of the Universe they couldn’t pay themselves extra multi-millions at year’s end!

By March of 2009, Goldman Sachs had decided to pay back the money it received in October the year before. By July, it had agreed to buy back the government’s $10 billion “investment” for $11 billion.  Because GS had already sent DC $318 million in “preferred dividends”(on warrants included in the buy-back), the annualized interest for the American taxpayer was a whopping 23.15%.  Taxpayers have yet to benefit from this glorious return.  Funds are fungible.  AIG got $70 billion from the government and sent$13 billion of it to Goldman.  Goldman netted $11.682 billion in federal money, no strings attached.  Even before factoring in the value of the 200 doses of Swine Flu vaccines doled out to Goldman (surely it’s not employing child labor; does the firm have 200 pregnant women working for it?), we should be brimful of admiration for the firm’s audacity and financial savvy.  Its political connections probably also have something to do with the success of these maneuvers.

The door doesn’t go just one way, it revolves.  Goldman recently increased its staff of registered lobbyists by hiring more than 30 ex-government officials.  Prominent in their number is former House Majority Leader Richard Gephardt (D-Mo.).

Goldman Sachs not only invests with revolving doors, it also invests in cold cash.  Over the last 30 years, Goldman and its employees have expended more than $43 million on lobbying and campaign contributions, and employee contributions of $980,945 to Obama’s presidential campaign were the most generous of any corporation.  It looks like Goldman is getting most generous returns on both kinds of its investment in government.

A month after paying back billions of bailout money, with taxpayer benefits of double-digit interest, Goldman announced that it had earmarked  $11.4 billion — so far — to reward its employees.   The press release noted that these employees were so productive that Goldman had raked in the highest quarterly returns in its 140-year history — that aforementioned $3.44 billion in profits.  Three years ago, under Republican regnum, more than 50 Goldmanites earned more that $20 million each.  In 2007, CEO Lloyd Blankfein was rewarded $600,000 as a base salary, topped by a bonus of $26.8 million in cash and  $41 million in stock and stock options. Even before you add Blankfein’s other sources of income to his tax return, say from previous rewards in stock, Cheney’s remuneration from Halliburton looks like chump change compared to these riches.

“I find [the bonuses] disconcerting,” the NYT quotes Lucian A. Bebchuk, a law professor at Harvard. “My main concern is that it seems to be a return to some of the flawed short-term compensation structures that played an important role in the run-up to the financial crisis.”  My main concern is how close 11.4 is to 11.682.  In percentage terms, the rewards from bailout funds are less than 1.2% higher than the proposed bonuses. After netting out networking expenses, they may be equal. My concern is little allayed by chanting “funds are fungible” one more time.

Do conflicts of interest make Goldman Sachthe new Halliburton?  No.  It may be even worse.  From Halliburton we at least got services, like housing, transport, food and postal services for our troops. Admittedly, the electrical wiring was lousy, dangerous and even fatal. We may have been overcharged, and some of the water may have been contaminated and the food sub-standard.  But we did get something.

What have we gotten from Goldman Sachs?  A privately run stimulus package that, au moins, will help the Financial Capital of the World balance its budget with taxes on those big bonuses.  Perhaps the jury’s still out on Who’s the Biggest Who. It’s hard to get regulators who know the field without recruiting them from the field – particularly in matters as recondite as High Finance.  Maybe the government employees with pedigrees from Goldman are working with impartial vigor to enhance the public weal.  If we cut Goldman and its alumni this slack, we should also be willing to acknowledge that Halliburton/KBR may have been the best of all possible contractors in Iraq.