Leading at the Top beyond Appearances: The case of John Boehner, Speaker of the U.S. House of Representatives

In the wake of President Obama's mission to execute Osama bin Laden, Speaker Boehner issued a statement complimenting his rival in the White House. In contrast, Sarah Palin gave George W. Bush all the credit. The Speaker, too, could have gone with political expediency. Therefore, for the Speaker to have publicly acknowledged Obama's victory as America's more generally involved political self-discipline. Speaker Boehner had sought to apply self-discipline, moreover, to his decentralized leadership style from the moment of his swearing in. Given the consolidating nature of power, such a leadership style in the U.S. House of Representatives faced considerable head winds.

The Full essay is at "Leading at the Top beyond Appearances."

See also, Skip Worden, Ethical Leadership, a booklet available at Amazon, and, more generally, Essence of Leadership, a book available at Amazon as well.

The Debt-Ceiling vs. the Fiscal Cliff as Negotiating Leverage

It is likely a drawback of democracy that hard decisions—that is, those in which fixing the problem goes against instant gratification or financial advantage—get pushed back, or “kicked down the road,” rather than addressed in a definitive way such that difficult problems are fixed. This structural problem can be seen in how Congressional leaders and the U.S. President delayed the “fiscal cliff” for two months at the beginning of 2013. More generally, the political tactic of holding the federal budget and the debt-ceiling as ransom evinces a fundamental flaw in democracy itself.

The full essay is at "Structural Flaws of Democracy."

On Leveraging the U.S. Debt Ceiling: How the Market Mechanism Handles Trust

On May 9 2011, U.S. House Speaker Boehner insisted “on trillions of dollars in spending cuts, and no tax increases, as the price for rounding up enough votes to allow more borrowing and prevent the country from defaulting on its debt,” according to the Huffington Post. The Ohio Republican had “said failure to increase the borrowing limit [in the summer of 2011] would trigger a financial disaster for the United States and the world.” On May 12^th in Congressional testimony, Ben Bernanke, chairman of the Federal Reserve Bank, cautioned against using raising the debt ceiling as leverage for getting a particular partisan policy-prescription on federal spending enacted into law. Richmond Fed President Jeffrey Lacker had told Reuters, “I do share the chairman’s concern that going up to the edge and playing chicken on the debt ceiling is not a wise strategy.”

The full essay is at "Leveraging the U.S. Debt Ceiling."

Congressional Ethics: Investing on Insider Info

To what extent should members of Congress be permitted to adjust their investment portfolios in line with general information on the economy gained as part of their legislative work? Whereas insider trading refers to information that is not available to the public on a particular company, the trades at issue as the U.S. headed toward a possible financial crisis pertained to diversified portfolios.

To take one example, John Boehner (R-Ohio), who would become the Speaker of the House after the 2010 Congressional elections, met U.S. Treasury Secretary Henry Paulson for breakfast on January 23, 2008. According to the Washington Post, “Boehner would later report the rearrangement of a portion of his own financial portfolio made on that same day. He sold between $50,000 and $100,000 from a more aggressive mutual fund and moved money into a safer investment. Boehner is one of 34 members of Congress who took steps to recast their financial portfolios  . . . after phone calls or meetings with Paulson; his successor, Timothy F. Geithner; or Federal Reserve Chairman Ben S. Bernanke, according to a Washington Post examination of appointment calendars and congressional disclosure forms. The lawmakers, many of whom held leadership positions and committee chairmanships in the House and Senate, changed portions of their portfolios a total of 166 times within two business days of speaking or meeting with the administration officials.”

The paper points out that the financial moves by the members of Congress were permitted at the time under congressional ethics rules.  Some ethics experts suggested that lawmakers should refrain from taking actions in their financial portfolios when they might know more than the public. In my view, we can assume that lawmakers will know more than the general public on matters relevant to investment decisions; the question is whether those decisions ought to be placed in blind trusts.

Lawmakers are going to know more than the public; merely sitting through hours of hearings will accomplish that. Indeed, part of the rationale for having a representative rather than a direct democracy is that representatives can be in a position to be better informed on the economy because lawmaking is at least in principle their full-time endeavor while they are in office. Essentially, the electorate delegates the popular sovereignty to the representative to focus on the lawmaking role.

Furthermore, human nature being what it is, we cannot but expect the lawmakers to have protected their investments by reducing the level of risk after learning that the U.S. economy could go over the cliff on account of being over-leveraged on subprime mortgages and over-securitized on them plus the related securitized insurance swaps. Adjusting their portfolios based on “insider information” on an upcoming stimulus plan is based on more particular information and thus more problematic even though it is not on a particular company. Regardless of the specificity of the information, however, any private gain from the public service is rightly generally regarded not only as unfair, but also inappropriate and unseemly.

At the very least, for lawmakers to use even the inevitable information they have on the general condition of the economy for private gain detracts from the notion that public service is a duty rather than an opportunity to enrich oneself. In this regard, having citizen lawmakers are preferable to careerists. However, even doing one stint in the U.S. House of Representatives could be financially lucrative, so even with term limits, the question of whether lawmakers should be able to adjust their investment portfolios would be relevant.

Although it is undoubtedly impossible to stop virtually any private benefit from accruing to members of Congress, their management of their own wealth should be separated from their public service where possible. The instrument of a blind trust makes this possible in the case of investments, assuming that direct and indirect communication with the managers of the trusts is preempted effectively. The trusts could even be mandated for several years after the lawmaker vacates public office.

More generally, the opportunistic orientation evinced by several lawmakers in January 2008 suggests that they may have viewed their respective offices less as stemming from a sense of a duty oriented to public service than as being an opportunity for personal gain. Rather than electing citizens who yearn for the office, perhaps we ought to seek out those who have reservations in place of ambition, yet would serve out of a sense of duty if called. In other words, whoever in the two parties gets people to run for the offices ought to be suspicious of people whose sense of duty seems all too comfortable and convenient to come out a sense of obligation. In other words, if it is easy to convince someone to run, then he or she probably is not the best person for public service.

Source:

Kimberly Kindy, “Lawmakers Reworked Financial PortfoliosAfter Talks with Fed, Treasury Officials,” The Washington Post, June 24, 2012.