Accountable Strategies blog

A blog about accountability issues in the public, private, and nonprofit sectors

Archive for October, 2009

Why didn’t we learn from the last swine flu debacle?

Posted by David Kassel on October 28, 2009

The Obama administration may be facing a credibility problem due to its apparent inability to anticipate the current shortage of vaccine to inoculate millions of Americans against the swine flu. 

As the Washington Post noted,  the Obama administration officials had projected in July that companies would make 80 million to 120 million doses of the vaccine by this month. They outlined an aggressive response to the current flu pandemic and promised to inoculate every American.

But only about 16.5 million doses have become available so far, putting the administration in the uncomfortable political position of appearing unprepared for what President Obama declared last week was a national emergency.

The Associated Press reported that federal Health and Human Services Secretary Kathleen Sebelius was blaming the manufacturers, who provided “overly rosy” numbers on the amount of vaccine that would be available.  It seems the Centers for Disease Control, however, did not anticipate the slower-than-expected growth of the virus in eggs in the manufacturing process for the vaccine.

Why are these things such a surprise?  Why didn’t the administration assume that the production might be slower than initially projected?

In Thinking in Time, their book on presidential decision making, historians Richard Neustadt and Ernest May analyzed the Ford administration’s mistakes in the previous swine flu fiasco of 1976.   It makes for interesting reading today.  After I re-read their account of the fiasco, which is one of several case studies sprinkled throughout the book, it seemed to me at least some of the Ford administration mistakes  may have been repeated this time around.

There were, to be sure, many differences between the situations then and today — the main difference being that in 1976, the flu refused to appear outside of 13 cases in a crowded Army camp.  Today, the flu is spreading rapidly, of course.  Compounding  the credibility problem resulting from the lack of the flu in 1976 was a severe neurological side effect that was statistically associated with the vaccine.  The mass immunization program was stopped.  So far, no side effects have shown up associated with the new vaccine.

But Neustadt and May contend that had a flu pandemic actually occurred in 1976, the supplies of the vaccine would have been inadequate to cover anywhere near all Americans, as Ford had promised.  Had that been the case, the Ford administration’s credibility problem could have been far worse than it was.  Sound familiar?  

In March 1976, David Sencer, the head of the then Center for Disease Control, had recommended that a new vaccine for the swine flu be developed, produced, tested, and distributed in the next three months, according to Neustadt and May.  His projection was that innoculation efforts would begin after Independence Day and that everyone would be reached by Thanksgiving.   President Ford agreed to the program after he received an endorsement from an ad hoc panel of experts.

Sencer and other Ford administration officials failed to ask many hard questions, Neustadt and May contended, including questions about tradeoffs between side effects and flu, distinguishing severity from spread, and stockpiling.

Neustadt and May maintained that a key reason why the Ford administration’s loss of credibility may have been far worse had swine flu erupted in this country or abroad had to do with the limitations at the time on the supply of the vaccine.  The Ford administration had managed to inoculate 40 million Americans — an amount apparently far higher than what has so far been accomplished today.  Yet, in what now sounds prescient, Neustadt and May wrote:

For down at the low level where shots actually were given, everything depended on the ingenuity and skill with which state plans had been prepared and local services enlisted…all those would have intersected wth supplies of vaccine insufficent to inoculate adults once and children twice if the demand ran high…

Unfortunately, that appears to be exactly the situation we are finding ourselves in today.

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The saga of a public records request

Posted by David Kassel on October 21, 2009

[Note: Cross-posted from Blue Mass Group.  Disclosure:  Written on behalf of The Fernald League for the Retarded, Inc.]

More than three months ago, I requested documents from the state of Massachusetts on the projected cost of renovating the state-run Wrentham Developmental Center to accomodate residents of the Fernald Center, which is slated to close in June. My request was made on July 9. 

The Fernald Center is the nation’s oldest state-run facility for persons with mental retardation.  I’ve been helping the Fernald League, a family-supported, nonprofit organization, in its battle to prevent the Patrick administration from closing the Center and privatizing its services.   The League contends that the administration has not taken a number of costs, such as the Wrentham renovations, into account in concluding the state will save money in closing Fernald.

From what I understand, there are only two documents involved in my records request: a feasibility study and a documented cost estimate for the renovations.  The state Division of Capital Asset Management (DCAM) was reportedly scheduled to award a contract to undertake the renovations this month.

At first, it looked as though I was going to get the records I’d requested.  Although it was long past the required 10-day response period, Peter Wilson, Deputy General Counsel at DCAM, wrote me on July 21, saying I should make an appointment to come in to review the records.  I contacted Wilson’s assistant, who told me she was attempting to track the records down.

Weeks went by, and I checked in periodically. Then, on August 21, I received a one-paragraph letter from Wilson, this time denying my request.  In his letter, Wilson stated that the requested records were exempt from disclosure because they “relate to policy positions being developed” by the state.  Wilson’s letter added:

The purpose of this exemption is to allow government offices to deliberate and form policy by engaging in free and frank exchange of options and ideas, which would be inhibited by public scrutiny.  [emphasis added]

Does the Massachusetts Public Records Law really have an exemption that talks about promoting the “free and frank exchange of options and ideas” and preventing that from being “inhibited by public scrutiny?” 

I didn’t think so.  Here’s the exemption in question.  It states only that exempt documents include “inter-agency or intra-agency memoranda or letters relating to policy positions being developed by the agency.”  The exemption says nothing about feasibility sudies or estimates of the cost of state construction or renovation projects.  It seemed to me that a  feasibility study and cost estimate for a specific construction project does not involve the development of policy.

Moreover, the law states that this exemption shall not apply to “reasonably completed factual studies or reports.”  In late August, I received a letter from Department of Developmental Services Commissioner Elin Howe, stating that bidding on the Wrentham project was scheduled for September, with a contract award scheduled for this month.  If that was the case, any feasibility study on the project would have had to be completed by the time Wilson was denying my request.

My appeal to the state Public Records Division has been pending since August 27.  This would seem to be an open-and-shut case.  Yet, it took me weeks to get through to the Public Records attorney who has been handling it.  Yesterday, he apologized for the delay.  But one has to wonder, what the hangup is here.  The attorney, by the way, has not requested Elin Howe’s letter to me.

I’m not optimistic about ever getting these records, given the findings of a CommonWealth magazine article last year about the routine flouting of the Public Records law by agencies throughout state government.

The Wrentham records are one of two public records requests that DCAM has denied the Fernald League.  I’ll write about the saga of our second request in a future post.

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Following the AIG money

Posted by David Kassel on October 8, 2009

U.S. taxpayers have pumped more than $180 billion in bailout assistance to the American International Group (AIG) because, as we all know, the company was too big to fail.

It’s not surprising that the GAO reached a similar conclusion  in a comprehensive report released last month on why the bailout occurred.  The GAO also looked at where the money actually went and whether or not it actually helped the company.  After slogging through the GAO report, I’ve come to the conclusion that the GAO has concluded that:

  • The company was indeed too big to fail.
  • The money was provided to AIG in the form of loans and equity investments, contingent on the company’s winding down its AIG Financial Products Corporation and divesting itself of other businesses. 
  • It’s too early to tell whether all of the bailout money will enable AIG to survive in the long term.

Not real comforting news to taxpayers.  But the report doesn’t really seem to take a position on a key criticism of the bailout, which was that the government shouldn’t have paid AIG to clean up the credit default swap mess.  Rather, it could have infused funds directly to the banks that bought the derivitives, letting them take haircuts.

Another question I’m now left with about AIG has to do with something that perhaps inadvertently stood out in the GAO report.   On pages 6 and 7 of the report, the company’s organizational chart is reproduced (it takes 2 pages to display the chart).   As the GAO notes, AIG comprises at least 223 companies and has operations in over 130 countries and jurisdictions worldwide.  In addition to its financial products division, the AIG organization includes the largest domestic life insurer and second largest domestic property and casualty insurance company in the U.S.

Couldn’t the Federal Reserve Bank of New York and the U.S. Treasury Department have ordered AIG to cut say 100 or 150 of those 223 divisions loose before pumping in all of that bailout money?

According to the organizational chart, AIG also owns the AIG Bulgaria Insurance Company, the American Fuji Fire and Marine Insurance Company, the New Hampshire Insurance Company, something called American General Finance Services of Alabama, the American General Consumer Discount Company,  and much much more.   AIG is a company that clearly spent years acquiring other companies all over the world until, yes, it finally achieved its goal — it became too big to fail.

Or did it?  Had the company begun shedding the AIG Bulgaria Insurance Company, the American General Consumer Discount Company and some of those other firms early on,  mightn’t it no longer have been too big to fail when the federal government began considering the bailouts? 

According to the GAO report, that divestment is only happening now.  The GAO stated that the Federal Reserve expects the disposition of assets to be the principal way by which AIG will repay the government loans and allow the Treasury to recoup equity investments.  The report added that AIG’s plan, according to its former chief executive officer, was to sell off about 65 percent of the company.  However, the current chief executive was reportedly re-evaluating that plan.

Meanwhile, until all of that debt is repaid and the equity interests repurchased or sold, U.S. taxpayers remain exposed to those credit and investment risks, according to the GAO.   The watchdog agency notes that “the sustainability of any positive trends of AIG’s operations and repayment efforts is not yet clear.” 
       
Compared to the scrutiny that Congress is now giving to efforts to finance the administration’s health care reform proposals, it seems the bailout of companies like AIG a few months back went through with few questions asked. 

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