GSA junket a case of government hypocrisy

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Editor’s Note: Matt Welch is editor in chief of Reason and co-author of “The Declaration of Independents: How Libertarian Politics Can Fix What’s Wrong with America (PublicAffairs).”

Story highlights

Matt Welch says Obama told bailed-out banks in 2009 to curb corporate junket spending

He says $822,000 GSA junket shows our lecturing government guilty of same thing

He says we like to shame bankers even as Washington wastes, overspends

Welch: Vegas junket not as surprising as Americans not seeing real Sin City is D.C.


In February 2009, President Barack Obama gave this stern warning to bailed-out banks:

“You are not going to be able to give out these big bonuses until you’ve paid taxpayers back,” Obama said at a town hall meeting. “You can’t get corporate jets, you can’t go take a trip to Las Vegas or go down to the Super Bowl on the taxpayers’ dime.”

He should have added: “… unless you work for the federal government.”

Twenty months later, as we all now know, a government agency called the General Services Administration rolled into Vegas on $822,000 worth of taxpayers’ dimes so that 300 federal employees could enjoy a luxury spa, a clown show and a mind-reader, among other “over the top” entertainments at a regional training conference.

Matt Welch

The revelation, unearthed by an internal inspector general, has resulted in two senior-level firings and the resignation of GSA chief Martha Johnson, while triggering the usual amount of political japery in Washington. But it’s worth lingering on the contrast between this incident and Obama’s original bank target.

The bailed-out bank that had been planning to send its most valuable employees to Vegas – as it had been doing for years – was Wells Fargo. One fact largely overlooked in the national shaming campaign that proved effective enough to derail the trip was that Wells Fargo didn’t want the bailout. Or at least said it didn’t when then-Treasury Secretary Hank Paulson summoned the nation’s top nine private bankers to Washington on October 13, 2008.

Here’s how Time magazine described the scene: “[T]he nine bank bosses, assembled in the Treasury’s imposing boardroom, were each handed a piece of paper with the terms: $25 billion of preferred shares each from Citigroup, JPMorgan Chase, Wells Fargo and Bank of America. In return for the capital, the U.S. would collect a 5% dividend in the first five years. Although Wells Fargo chairman Richard Kovacevich resisted, Paulson gave the bankers no choice.”

Newsweek’s Michael Hirsh put it even more explicitly, and presciently: “Richard Kovacevich had a point. Why should his company, Wells Fargo, sign its freedom (and his compensation) away to the U.S. Treasury when, unlike many other banks, it hadn’t overloaded itself with risky, mortgage-backed securities? The Wells Fargo chairman eventually agreed Monday to Treasury Secretary Hank Paulson’s capital injection plan – it was, frankly, an offer he couldn’t refuse – but Kovacevich’s objections still resonate. Amid the continuing market turmoil, there is a sense that all of us are being asked to assume collective guilt for the large, but still identifiable, group of rogues and villains who got us into this mess. And then we’re supposed to just forget about it.”

A funny thing about collective shame – we are happy to administer it on CEOs who get their arms twisted by the feds, yet we shy away from applying it to one of the only truly collective entities we have: taxpayer-funded government.

We love to bash Goldman Sachs for trading exotic mortgage-backed derivatives, but we are far less likely to even point out that the government-sponsored enterprises Fannie Mae and Freddie Mac were trailblazers on the derivatives-trading fronts.

It shouldn’t be surprising in this climate that federal employees would assume they get to play under different ethical rules and public scrutiny than fat-cat bankers. After all, Senate Majority Whip Dick Durbin, D-Illinois, said last month that discretionary spending has been cut “to the limit,” and Obama just this week thundered that the House GOP’s recently proposed budget – which, by the way, increases spending from $3.5 trillion to $4.9 trillion over the next decade – amounts to “social Darwinism” that deliberately guts the middle class.

And let’s not forget what the GSA does: As The New York Times puts it, the agency is “essentially the government’s personal shopper for big-ticket items, like buying and leasing buildings and cars.” These are precisely the people tasked with making sure taxpayer dollars are spent most wisely.

We have a federal government on autopilot, borrowing 40 cents on every dollar, after a decade-plus bipartisan spending binge that has doubled the budget in nominal terms. Washington is a boomtown, gentrifying rapidly as the rest of the country eagerly awaits the appearance of green shoots.

The surprise isn’t that a federal agency went wild, or even that it got caught. What remains a genuine stumper is that the rest of the country hasn’t quite figured out that the real Sin City has relocated 2,500 miles east.

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