After the financial crisis of 2008, many of us became aware of a revolving door between Wall Street on one hand and US regulators and political appointees on the other, a subtle form of corruption that exists to some degree in most countries.
In the US, high ranking officials responsible for economic policy under Presidents from both major parties often come out of the big financial institutions and return to them after they finish their government service. At the same time, there’s a similar movement by regulators into high paying jobs in the very industries they were supposed to be regulating or, in the case of prosecutors, the law firms that represent these companies.
One obvious example of this is Lanny Breuer, the top prosecutor dealing with white collar crime and corruption in the immediate aftermath of the sub-prime mortgage crisis. As he made clear when interviewed by PBS’ Frontline in 2013, his refusal to prosecute criminal behavior in the banking industry came from the worry he said “kept him up at night”, that doing so could damage the American (and world) economy.
As many commentators said at the time, these kinds of philosophical questions shouldn’t be keeping a prosecutor from doing his job. To put it bluntly, they were above his pay grade.
Having embarrassed himself on national television, Breuer left his post in 2013 to return to his old law firm, Covington and Burling, generally considered Washington DC’s most prestigious, where an estimated $4 million dollar salary awaited him. Covington has represented many high profile clients Breuer probably investigated in his time at the DOJ, including Bank of America, Morgan Stanley and Halliburton offshoot KBR. He was later joined at the firm by his former boss, retired Attorney General Eric Holder, who apparently found his old office had been kept empty for him.
While these individuals and many others have eroded trust in the fairness of the economic system, there’s another, less reported on revolving door in Washington that may have caused even more human misery than these financial shenanigans.
The Military-Industrial Revolving Door
There’s a key rule in place under the 2008 National Defense Authorization Act (NDAA) covering service members who go on to jobs in the defense industry. All that’s really required of them is they get an ethics opinion from government lawyers before making procurement deals over $10 million dollars. Despite this, several investigations have shown that even the database tracking this single rule is incomplete.
However, when looking into this issue a couple of years ago the Washington Post did uncover some interesting information, “in 2008 the Government Accountability Office (GAO) found that 52 of the biggest defense contractors employed 2,435 former generals, senior executives and acquisition officers. Of those, 422 were in a position to work on defense projects directly related to their former agencies”.
On the industry side there’s an obvious incentive to get former military officers, especially those who were involved in procurements, on their payrolls. One group, the National Association of Corporate Directors (NACD) has an annual conference called ‘From the Battlefield to the Boardroom’ which brings together retired and retiring military officers and executives from companies including Lockheed Martin, the country’s biggest arms manufacturer.
Take the example of Mike Boera, a former Major General in the US Airforce who became the Executive of Intelligence, Information and Services at Raytheon in 2015. According to the Project on Government Oversight (POGO), a non-partisan watchdog group, Boera held major procurement positions in the air force “developing programs, business plans and budgets for different systems”.
Although Major General Boera may not have had any involvement in the actual deal, the company was awarded $34 million by the Airforce this past July to do two tests of a new “advanced aerial decoy jammer” missile the MALD X that could lead to a much larger contract upon demonstration.
There’s also a growing market in foreign sales, and in this area we find not only retired officers, but currently serving ones, working with industry to sell military hardware around the world, as reported recently by Zaid Jilani and Alex Emmons on The Intercept.
Their report focused on a Senate Aerospace Caucus reception held on the 14th of September and co-hosted by the Aerospace Industries Association (AIA), “the lobbying group for weapons contractors like Lockheed Martin, Boeing, Northrop Grumman, and Raytheon.” This open bar gathering brought out industry representatives in honor of Vice Admiral Joseph Rixey, who heads up the Defense Security Cooperation Agency (DSCA).
The DSCA oversees arms deals with US allies, themselves worth around $47 billion last year, up from just $8.6 billion a decade before. One trend that should probably worry people is the increasing number of weapons, including advanced missile systems, making their way to Eastern Europe and the Baltics, provoking more Russian spending in response.
Not only was Rixey showered with praise by industry executives at the gathering, Sens. Patty Murray (D-Wash) and Jerry Moran (R-Kan) showed bipartisan support for his hard work ensuring that US weapons get to countries like Egypt and Saudi Arabia, serial human rights abusers whose spending is likely to grow along with their internal repressions and the latter’s ongoing war in Yemen.
This crossover also occurs in the field of nuclear weapons where an investigation by the Center for Investigative Reporting last Summer showed that six influential individuals had all moved in and out of government and industry throughout their careers, creating multiple conflicts of interest in the process.
Failing Upward, It’s the Washington Way
What’s particularly depressing about these revolving doors is that by almost any objective measure most of these people would be seen as failures in any normal environment, if for very different reasons. Only in Washington and on Wall Street does a lack of results result in more respect and success.
On the banking side, although they tanked the world economy and put many Americans out of their homes, none of the big players in the industry faced any consequences. Now, knowing that taxpayers will bail them out, they’ve been shown time and again to be engaged in further gaming of the system. We saw this most recently in the case of Wells Fargo opening fraudulent accounts to puff up their stock price.
In terms of the military, and I know this opinion won’t be popular with some, the failure of the brass in Afghanistan, Iraq and Libya to create any outcome but chaos needs to be taken into account by the civilian leadership when it comes to both their failed strategies and ever growing funding.
Part of the problem is political, arms manufacturing provides some of the last good jobs out there and the bigger companies make sure they are spread throughout the country. They also have an army of lobbyists comparable to the fossil fuel industry whose own ambitions in terms of markets have created new opportunities for arms makers to sell their products.
Finally, its also interesting that while the US military has been fighting and losing to low level insurgencies in several countries for more than a decade, the Generals and Admirals insist on buying high ticket items that are useless in this context but great for scaring rivals Russia, China and, to a lesser degree, Iran. In the process they’re creating an arms race that makes money for some but creates bad outcomes for all, especially smaller countries targeted for’ regime change’ or ‘humanitarian intervention’.