Will the Citigroup Ruling Challenge Health Care Leaders' Impunity?

A federal judge's refusal to approve yet another cozy settlement that was supposed to resolve allegations of wrong-doing by a giant corporation has left the financial world atwitter.  It may be that this ruling will also affect the coziness between giant health care corporations and government regulators. 

Summary of the Citigroup Case

We first discussed this case twp weeks ago here.  Here is a summary of the government's (in this case, the Securities and Exchange Commision's) original allegations from the New York Times.

According to the Securities and Exchange Commission, Citigroup stuffed a $1 billion mortgage fund that it sold to investors in 2007 with securities that it believed would fail so that it could bet against its customers and profit when values declined. The fraud, the agency said, was in Citigroup’s falsely telling investors that an independent party was choosing the portfolio’s investments. Citigroup made $160 million from the deal and investors lost $700 million.

The Problems with the Proposed Settlement
Judge Jed Rakoff refused to approve the settlement because of a series of problems, listed below as summarized by the Schumpeter columnist in the Economist.

Mr Rakoff faulted the SEC for prosecuting Citigroup for negligence when a fraud prosecution was warranted; for failing to provide the court with 'any proven or admitted facts upon which to exercise even a modest degree of independent judgment'; for erroneously contending that 'public interest…is not part of [the] applicable standard of judicial review'; and for wrongly arguing that 'if the public interest must be taken into account, the SEC is the sole determiner'.

Furthermore,

Mr Rakoff also attacked a second condition of the settlement. Citigroup had agreed to operate under a court injunction if it ever violated the deal, which could lead to contempt charges. Whatever threat this carried, Mr Rackoff wrote, it was mitigated because Citigroup, as other financial firms, had been cited similarly over the past decade—and never faced any consequences.

The Parallels with Legal Settlements Made by Health Care Organizations

Several of the features of the settlement that the Judge found so objectionable are commonly also features of the settlements we have seen involving health care organizations. Government regulators often seem to make much milder charges that were warranted by the apparent facts. They make the organizations party to corporate integrity or deferred prosecution agreements, even though sometimes the same corporations were already subject to such agreements when they appeared to misbehave again. The agreements often allow the organizations to neither admit to or deny any charges, leaving the facts of the case forever in doubt.

Matt Taibi in the Rolling Stone provided some pithy comments on these commonly seen features of legal settlements.

By accepting hundred-million-dollar fines without a full public venting of the facts, the SEC is leveling seemingly significant punishments without telling the public what the defendant is being punished for. This has essentially created a parallel or secret criminal justice system, in which both crime and punishment are adjudicated behind closed doors.

This system allows for ugly consequences in both directions. Imagine if normal criminal defendants were treated this way. Say a prosecutor and street criminal come into a judge’s chamber and explain they’ve cooked up a deal, that the criminal doesn’t have to admit to anything or plead to any crime, but has to spend 18 months in house arrest nonetheless.

What sane judge would sign off on a deal like that without knowing exactly what the facts are? Did the criminal shoot up a nightclub and paralyze someone, or did he just sell a dimebag on the street? Is 18 months a tough sentence or a slap on the wrist? And how is it legally possible for someone to deserve an 18-month sentence without being guilty of anything?

Such deals are logical and legal absurdities, but judges have been signing off on settlements like this with Wall Street defendants for years.

As we have said numerous times before, (starting here in 2008) the current manner of regulation, in which organizations pay fines (and sometimes submit to corporate integrity or deferred prosecution agreements), rarely admit any guilt, but in which individuals who directed, authorized or implemented the alleged misbehavior almost never suffer any negative consequences, fails to deter future bad behavior. We have noted that the costs of the settlements are paid by the organization as a whole, and thus simply regarded as costs of doing business by executives. The leaders' impunity will allow the bad behavior to be repeated again and again.

Here is how Taibbi and Rakoff put it:

these crappy settlements have evolved into a kind of cheap payoff system, in which crimes may be committed over and over again, and the SEC’s only role is to take a bribe each time the offenders slip up and get caught.

If you never have to worry about serious punishments, or court findings of criminal guilt (which would leave you exposed to crippling lawsuits), then there’s simply no incentive to stop committing fraud. These SEC settlements simply become part of the cost of doing business, as Rakoff notes:

As for common experience, a consent judgment that does not involve any admissions and that results in only very modest penalties is just as frequently viewed, particularly in the business community, as a cost of doing business imposed by having to maintain a working relationship with a regulatory agency, rather than as any indication of where the real truth lies. This, indeed, is Citigroup's position in this very case.

That line, 'a cost of doing business imposed by having to maintain a working relationship with a regulatory agency,' is one of the more brutally damning things you’ll ever see a judge write. Rakoff is essentially saying that these fines are payoffs to keep the SEC off the banks’ backs. They’re like the pad that numbers-runners or drug dealers pay to urban precinct-houses every month to keep cops from making real arrests. That's what he means when he refers to 'maintaning a working relationship.' It's heavy stuff.

What the Judge appears to be saying is that the whole system stinks of regulatory capture, and that the settlements paid by the organizations are the moral equivalent of bribes paid to government officials. That is indeed "heavy stuff."

Now that Occupy Wall Street has made it socially acceptable to discuss the economic dysfunction that lead to the great recession or global financial collapse, I can only hope that this discussion will lead to a parallel discussion about health care dysfunction. It certainly seems that the regulatory capture that seems to be part of the dismantling of regulation of finance is similar to regulatory capture affecting health care. But I await someone beyond us few lonely bloggers to take up this topic.

I might as well end with this sentiment from 2009 regarding another case over which Judge Rakoff presided:
Again, in my humble opinion, until the people responsible for the bad behavior experience negative consequences from that behavior, they will continue to perform, direct, and condone bad behavior. We will not achieve real health care reform in the US until we effectively deter unethical, self-serving behavior by leaders of health care organizations.

The Parallels Between Health Care and Financial Dysfunction: Leadership's Impunity as Demonstrated by the Citigroup Case

For years, we have noted the parade of legal settlements made by large health care organizations.  The parade is notable on one hand because it illustrates how often some of our best known health care corporations and institutions behave badly. 

Impunity for Health Care Leaders

It is notable on the other hand because it illustrates how the leaders of these organizations have virtual impunity.  In very few cases has any person who authorized, directed, or implemented bad behavior faced any negative consequences.  The executives of these organizations often have gotten to continue making millions of dollars while the financial costs of settlements are borne by the company as a whole, and hence by all the employees, no matter how poorly paid or uninvolved, and all stockholders, no matter how powerless they were to prevent the bad behavior.

The legal settlements that now seem to be the only effort made by the government to ensure fairness, honesty, and a level playing field in the health care "industry" seem to have no deterrent effect.  Some of the most famous health care companies have been subject to successive settlements, each of which failed to deter the next bout of bad behavior.  For example, we just posted about NINE separate settlements made by global pharmaceutical giant Pfizer Inc from 2002 to 2011, the largest for $2.3 billion.  Yet a succession of Pfizer CEOs made tens of millions a year, and left with golden parachutes (see post here).  Johnson and Johnson subsidiaries have settled with corporate guilty pleas to several misdemeanors, while the company CEO made tens of millions a year and served as an adviser to the President.  (See summary of offenses here, CEO's compensation here, and his White House role here.) 

With the rise of the "Occupy Wall Street" movement and its spin-offs, and the resurgence of the global financial crisis now threatening the Euro-zone in particular, the discussion of how the world's finance system has become fiercely dysfunctional that should have occurred after the crisis began in 2008 is now starting.  That discussion has now focused on the relative impunity of the leadership of finance firms, a striking parallel to what has gone on in health care.

The Citigroup Settlement

The case that has created headlines is that of Citigroup, and a new settlement of allegations brought against it by the US Securities and Exchange Commission (SEC).  A commentary by Jonathan Weil in Bloomberg explained it thus:

Five times since 2003 the Securities and Exchange Commission has accused Citigroup Inc’s main broker-dealer subsidiary of securities fraud. On each occasion the company’s SEC settlements have followed a familiar pattern.

Citigroup neither admitted nor denied the SEC’s claims. And the company consented to the entry of either a court injunction or an SEC order barring it from committing the same types of violations again. Those 'obey-the-law' directives haven’t meant much. The SEC keeps accusing Citigroup of breaking the same laws over and over, without ever attempting to enforce the prior orders. The SEC’s most recent complaint against Citigroup, filed last month, is no different.

As in most of the health care cases, Citigroup has been subject to multiple legal settlements, each of which apparently failed to deter the next bit of bad behavior. Also, while the SEC made the company promise in particular settlements not to misbehave again, the SEC never held the company accountable for these promises.

Other features of the Citigroup settlement paralleled many of those in health care. The company was never made to admit bad behavior. No top executive ever paid any penalty.

However,unlike many health care cases, the Citigroup case produced an uproar, partially because the presiding judge refused to accept the settlement without questions.

A Judge Questions the Settlement

Instead, the judge had caustic questions for both the SEC and Citigroup. For example, as reported by the Washington Post,

A federal judge Wednesday challenged the SEC’s plan to settle a fraud case against Citigroup for $285 million, saying that the deal would recoup only a fraction of investors’ losses and would leave the firm free to proclaim its innocence in private lawsuits over the remaining damages.

The judge used the Citigroup case to mock the SEC’s traditional way of doing business — allowing defendants to settle without admitting or denying wrongdoing.

The unproven allegations, U.S. District Court Judge Jed S. Rakoff said, 'are no better than rumor or gossip.'


'Does not the SEC of all agencies have an interest in establishing what the truth is?' Rakoff asked.

Also, he mocked the SEC practice of requiring promises of good behavior, that go unenforced,

SEC settlements routinely include court orders prohibiting defendants from committing similar violations in the future and exposing them to potentially severe consequences if they do. However, the agency has refrained from enforcing those injunctions against repeat offenders.

Citigroup was subject to two injunctions that predated the current case, SEC chief litigation counsel Matthew T. Martens said.

Rakoff suggested that the injunctions are 'just for show.'

The SEC lawyer said the agency takes past offenses into account when determining an appropriate penalty. Other SEC officials said after the hearing that past injunctions can be enforced only when the SEC catches a defendant in an ongoing violation.

The proposed settlement also calls for Citigroup to take remedial steps to reduce the risk of future violations; Rakoff asked if those were merely 'window dressing.'

This unusual hearing was covered by the Wall Street Journal, the New York Times, Bloomberg, and other major media outlets.

Finance's Own Parade of Settlements

Meanwhile, the NY Times did some in-depth reporting to show that the Citigroup case was hardly a fluke. There has been a parade of legal settlements of bad behavior by finance firms paralleling the parade we have discussed by health care organizations, although the former occurred without there being a "Finance Renewal" blog to comment on them. As written by Edward Wyatt,

Citigroup is far from the only such repeat offender — in the eyes of the S.E.C. — on Wall Street. Nearly all of the biggest financial companies, Goldman Sachs, Morgan Stanley, JPMorgan Chase and Bank of America among them, have settled fraud cases by promising the S.E.C. that they would never again violate an antifraud law, only to do it again in another case a few years later.

A New York Times analysis of enforcement actions during the last 15 years found at least 51 cases in which 19 Wall Street firms had broken antifraud laws they had agreed never to breach.

In particular,

Of the 19 companies that the Times found to be repeat offenders over the last 15 years, 16 declined to comment. They read like a Wall Street who’s who: American International Group, Ameriprise, Bank of America, Bear Stearns, Columbia Management, Deutsche Asset Management, Credit Suisse, Goldman Sachs, JPMorgan Chase, Merrill Lynch, Morgan Stanley, Putnam Investments, Raymond James, RBC Dain Rauscher, UBS and Wells Fargo/Wachovia.

The NY Times article also found some experts willing to criticize the current effeteness of government regulation and law enforcement:

Senator Carl Levin, a Michigan Democrat who is chairman of the Senate permanent subcommittee on investigations and has led several inquiries into Wall Street, said the S.E.C.’s method of settling fraud cases, is 'a symbol of weak enforcement. It doesn’t do much in the way of deterrence, and it doesn’t do much in the way of punishment, I don’t think.'

Barbara Roper, director of investor protection for the Consumer Federation of America, said, 'You can look at the record and see that it clearly suggests this is not deterring repeat offenses. You have to at least raise the question if other alternatives might be more effective.'

Also,

some experts view many settlements as essentially meaningless, particularly since they usually do not require a company to admit to the accusations leveled by the S.E.C. Nearly every settlement allows a company to 'neither admit nor deny' the accusations — even when the company has admitted to the same charges in a related case brought by the Justice Department....

Summary

As we learn more about what has gone wrong with our political economy, the parallels with what has gone wrong with health care become more obvious. Of course, health care must operate within a larger environment, and there has been increasing overlap between the leadership of finance and of health care.

As the economy continues to sag, with rising unemployment and under-employment, increasing foreclosure, homelessness and poverty, and the decreasing likelihood of an even minimally comfortable retirement for many, it appears peoples' minds are increasingly focused on what has gone wrong, and particularly how ill-informed, incompetent, self-interested, conflicted and corrupt leadership of financial firms has lead to this severe economic dysfunction.

I also hope that as the health care crisis continues to worsen, with rising costs, decreasing access, and degrading quality, peoples' minds will also increasingly focused on what has gone wrong, and particularly, as we have been saying for nearly seven years, how ill-informed, incompetent, self-interested, conflicted and even corrupt leadership of health care organizations has lead to this severe health care dysfunction.

Maybe someone will now take seriously our calls for... true health care reform that requires competent, ethical leadership that upholds health care's core values within a governance structure of accountability, integrity, transparency, and honesty. Tackling the deep problems in health care will require tackling the deeper problems in the global political economy which helped to generate them.

Director of Bristol-Myers-Squibb to Run Weill Cornell Medical School

How the New York Times reported on a change in leadership at one New York medical school has made one issue of interest to Health Care Renewal a bit less anechoic. Here is the beginning of the story:

A Harvard University researcher and professor with strong ties to the pharmaceutical industry has been selected as the new dean of Weill Cornell Medical College in Manhattan, as Cornell University seeks to greatly expand its research programs and obtain more federal and private financing, college officials said Wednesday.

The new dean, Dr. Laurie H. Glimcher, 60, who has ties to the pharmaceutical giants Merck and Bristol-Myers Squibb as well as to scientific and biotechnology companies, said she wanted to use her experience to forge partnerships with both the public and private sectors.

Dr Glimcher's "ties" to Bristol-Myers-Squibb are particularly striking:

Bristol-Myers Squibb, where she has been on the board since 1997, paid her $244,500 in compensation in 2010, including fees and stock awards, according to its 2011 proxy statement. She received $1.4 million in deferred share units, by far the most of any director.

A "New Species" of Conflicts of Interest

A long time ago, in 2006, we first blogged about a "new species of conflict of interest" which we thought
might prove to be even more important than other conflicts of interest afflicting health care that were then starting to be discussed.  This new species  involved health care organizational leaders who were simultaneously members of the boards of directors of for-profit health care corporations.  We posited these conflicts would be particularly important because being on the board of directors entails not just a financial incentive.  It ostensibly requires board members to "demonstrate unyielding loyalty to the company's shareholders" [Per Monks RAG, Minow N. Corporate Governance, 3rd edition. Malden, MA: Blackwell Publishing, 2004. P.200.]   Thus, for example, the conflict posed by the president of a university, to whom a medical school and academic medical center report, who also is the director of a pharmaceutical company, would be extreme.

In 2006, these apparently major conflicts of interest were highly anechoic, and generally otherwise not considered to be newsworthy or fit for discussion in the medical and health care literature.  This, however, is starting to change.  By 2010, the New York Times published a report, albeit in one of their blogs, on a controversy at the Unviersity of Michigan about whether its president's position on the Johnson and Johnson board had influenced her backing of anti-smoking measures, given that Johnson and Johnson makes smoking cessation products (see post here).

Now, mention of this sort of particularly intense conflict of interest went into the lead paragraph of a story in one of the world's most respected newspapers.

A Conflict Cutting Both Ways: The Bristol-Myers-Squibb Settlement

In addition, the Times story connected another dot:

While she has been on the board, the company has paid hundreds of millions of dollars to settle federal and shareholder complaints that it had inflated sales figures, although Dr. Glimcher herself was not found liable.

That underlines the point that people who simultaneously are leaders of both non-profit health care institutions (like medical schools and hospitals) and for-profit health care corporations ought to simultaneously be held accountable for the actions of both, which may put them in uncomfortable positions.

Actually, the Times article seemed to soft-pedal what the 2007 Bristol-Myers-Squibb settlement was actually about. As we discussed in this post, the settlement was actually in the amount of $515 million, and the government allegations that lead to the settlement were actually about more than inflated sales figures. From the 2007 Department of Justice news release:

First, the Government alleged that, from approximately 2000 through mid-2003, BMS knowingly and willfully paid illegal remuneration to physicians and other health care providers to induce them to purchase BMS drugs.

Second, the Government alleged that, from 2002 through the end of 2005, BMS knowingly promoted the sale and use of Abilify, an atypical antipsychotic drug, for pediatric use and to treat dementia-related psychosis, both 'off-label' uses. The Food and Drug Administration has approved Abilify to treat adult schizophrenia and bi-polar disorder, but has not approved the use of Abilify for children and adolescents or for geriatric patients suffering from dementia-related psychosis. Indeed, the FDA has mandated that the package for Abilify carry a 'black box' warning concerning its use in the treatment of dementia-related psychosis.

Third, the Government alleged that both BMS and Apothecon set and maintained fraudulent and inflated prices for a wide assortment of oncology and generic drug products with the knowledge that federal health care programs established reimbursement rates based on those prices. By reporting false and fraudulent prices that were substantially higher than commonly and widely available prices in the marketplace, BMS and Apothecon created a 'spread' between the reimbursement rates for federal health care providers and the actual prices for the drugs charged to its customers. The larger the spread on a drug, the larger the profit or return on investment for the provider. Because reimbursement from federal programs was based on the fraudulent, inflated prices, the United States alleged that BMS and Apothecon caused false and fraudulent claims to be submitted to federal health care programs.

Finally, the Government alleged that BMS knowingly misreported its best price for the anti-depression drug, Serzone. 

Dr Glimcher has been on the BMS board since 1997, so the actions that lead to these allegations and then the settlement clearly occurred on her watch. Nonetheless, the Times noted:

Dr. Glimcher, an immunologist with a strong interest in osteoporosis, defended her outside interests, saying they presented no conflict as long as they were transparent. She said she wanted to 'leverage the strengths of everyone,' whether scientists, pharmaceutical companies or biotechnology companies. 'There should be no silos between all of these different strengths,' she said.

How simple transparency would remove a conflict created by a fiduciary duty to the Bristol-Myers-Squibb stockholders, and reinforced by a yearly pay-check of $244,500, she did not say.  Neither did she say how transparency about her service on the board would eliminate her responsibility for actions taken by the BMS management that occurred on her watch.

Dubious Enthusiasm from the Former Chairman of Bailed-Out Citigroup

The conflict did not seemingly dim the enthusiasm of the Weill Cornell board for her candidacy. As the Times reported:

Sanford I. Weill, the former chairman of Citigroup who with his wife was the benefactor for whom the college was named in 1998, said Wednesday that Dr. Glimcher had come to his attention through a good friend, Jim Robinson, a co-founder of the technology venture-capital firm RRE Ventures and a former chairman of Bristol-Myers Squibb and chairman and chief executive of American Express.

'He recommended that I meet Laurie Glimcher when he heard we were going to look for a new dean,' Mr. Weill said.

That would be the Sanford Weill who built up Citigroup into a bank that was too large to fail, and which was prevented from failing by a huge government bailout (see this post). In his epic, The Sellout, about the global financial collapse, this is how Charles Gasparino described Weill (p. 144):

But in reality, Will never really ran anything. He was a visionary, to be sure, but one whose vision was so myopically focused on building the empire had lusted for for so long and on its share price that he ignored just about everything else.

Weill's record would suggest that his judgment about Dr Glimcher may be open to question.

Even More Conflicts of Interest

To add a bit more icing to the conflict of interest cake, Dr Glimcher has other financial relationships to which the Times vaguely alluded. The latest (2011) Bristol-Myers-Squibb proxy statement listed the following:
- scientific advisory board memberships: Health Care Ventures, Inc, (which invests in new pharmaceutical and biotechnology companies) Nodality Inc, (which develops diagnostics and pharmaceuticals), Abpro Inc (which makes antibodies and proteins), and Theraclone Sciences Inc, (which also is developing antibodies for therapeutic purposes)
- board of directors membership: Waters Corporation (maker of laboratory equipment used in life sciences and pharmaceutical discovery, research and development, and commercialization.)

One hardly knows how she would find the time to do anything besides fulfill these responsibilities. No wonder that the Times article said:

Cornell University’s president, Dr. David J. Skorton, said he believed Dr. Glimcher had the skills to carry out the medical school’s plan to double its research capacity and to help the university compete to develop a new high-tech campus proposed by the Bloomberg administration.

Dr Glimcher certainly seems as tied into the world of commercial pharmaceuticals and biotechnology as much as any ostensible academic might be. Indeed, as posted here, Dr Glimcher was quoted in a defense of the then current policy and conflicts of interest at Harvard:

Dr. Glimcher says industry money is not only appropriate but necessary. 'Without the support of the private sector, we would not have been able to develop what I call our ‘bone team’ in our lab,' she said at a recent student and faculty forum to discuss industry relationships. Merck is counting on her team to help come up with a successor to Fosamax, the formerly $3 billion-a-year bone drug that went generic last year.

So at that time Dr Glimcher thought it was perfectly proper and appropriate for her to be paid by Merck to develop new drugs for that company while she was ostensibly a full-time faculty member at the Harvard Medical School (not to mention a full-time board member of one of Merck's competitors.)

Summary and Some Questions

So to summarize, Cornell Weill Medical School just named a new dean who has been a leader (as member of the board of directors) of Bristol-Myers-Squib for 14 years, on whose watch there the company paid a huge settlement and entered a corporate integrity agreement for allegations of kickbacks and fraud, and who has also been a leader of a biotechnology company, and advisor to a biotechnology and pharmaceutical venture capital fund and to three other biotechnology companies.  She declared she has no conflicts because she has revealed these relationships, and seemingly has been hired mainly to raise money from the pharmaceutical and biotechnology industry.

So maybe some intrepid journalist and/or student will ask her:
- Given that they now will be reporting to a member of the board of Bristol-Myers-Squibb, should Cornell students and faculty favor its products or policies that it supports?  Should they worry if they do not?  Should they worry about saying or writing anything that might not be seen as supportive of it?  Should they consider themselves to be now in the Bristol-Myers-Squibb medical school?
On the other hand,
- Does Dr Glimcher feel responsible for the actions of BMS management that lead to its settlement and corporate integrity agreement?  If not, how can she have a fiduciary responsibility to its stockholders?

But I will not hold my breath waiting for answers.

At least one hopes that putting these issues in the New York Times will provoke some discussion about whether academic institutions should knowingly seek leaders who must serve so many masters.  Maybe they would do better if they sought leaders who would be notable for their whole-hearted devotion to patient's interests and to the integrity of teaching and research rather than for their cozy ties to other top health care leaders.

What a Conflicted Web We Weave: Academic Economists, Finance, the Global Economic Meltdown, and the Impending Health Care Collapse

We have been writing about conflicts of interest in health care now for a long time.  We started with a focus on academic physicians'  and leaders' financial ties to pharmaceutical/ biotechnology/ device companies, then went on to the intense conflicts generated by academic medical and other health care non-profit leader who also sit on boards of directors of for profit health care corporations, and to conflicts affecting various kinds of respected not-for-profit health care organizations, like medical societies and patient advocacy groups.

Meanwhile, we uncovered the curious dominance of the boards of some health care organizations by leaders in the finance world, including some of the leaders of the failed companies that brought us the "great recession."  This did seem like a leadership problem for health care, in terms of the dominance of health care leadership by the elite of another industry that did not exactly seem to share the values we physicians swear to uphold.  However, it did not seem to be a conflict of interest problem, until now.

The Chronicle of Higher Education just published an article by the director of a soon to be released documentary on conflicts of interest and academics, but this time academic economics.

Charles Ferguson, the author, used as an example the Larry Summers, the former President of Harvard University (and hence leader of the Harvard Medical School, School of Public Health, and Harvard's teaching hospitals).  We had commented here about Summers' poor fit for the role of an academic medical leader, and here and here about the dominance of Harvard leadership by leaders of (sometimes failed) financial institutions.  Ferguson summarized (bad pun, sorry) the problem thus:

Summers is unquestionably brilliant, as all who have dealt with him, including myself, quickly realize. And yet rarely has one individual embodied so much of what is wrong with economics, with academe, and indeed with the American economy.

The problem is essentially one of huge conflicts of interest:

the revolving door is now a three-way intersection. Summers's career is the result of an extraordinary and underappreciated scandal in American society: the convergence of academic economics, Wall Street, and political power.

Summers bear huge responsibility for the current economic mess:

Consider: As a rising economist at Harvard and at the World Bank, Summers argued for privatization and deregulation in many domains, including finance. Later, as deputy secretary of the treasury and then treasury secretary in the Clinton administration, he implemented those policies. Summers oversaw passage of the Gramm-Leach-Bliley Act, which repealed Glass-Steagall, permitted the previously illegal merger that created Citigroup, and allowed further consolidation in the financial sector. He also successfully fought attempts by Brooksley Born, chair of the Commodity Futures Trading Commission in the Clinton administration, to regulate the financial derivatives that would cause so much damage in the housing bubble and the 2008 economic crisis. He then oversaw passage of the Commodity Futures Modernization Act, which banned all regulation of derivatives, including exempting them from state antigambling laws.

Also,

Over the past decade, Summers continued to advocate financial deregulation, both as president of Harvard and as a University Professor after being forced out of the presidency.

Not only did Summers set up the structure that allowed reckless bets with other people' money on opaque financial derivatives by finance leaders who stood to make huge gains if they won their bets, but could foist all losses on others, but he actively attempted those who tried to warn us all of the impending economic collapse.

Summers remained close to Rubin and to Alan Greenspan, a former chairman of the Federal Reserve. When other economists began warning of abuses and systemic risk in the financial system deriving from the environment that Summers, Greenspan, and Rubin had created, Summers mocked and dismissed those warnings. In 2005, at the annual Jackson Hole, Wyo., conference of the world's leading central bankers, the chief economist of the International Monetary Fund, Raghuram Rajan, presented a brilliant paper that constituted the first prominent warning of the coming crisis. Rajan pointed out that the structure of financial-sector compensation, in combination with complex financial products, gave bankers huge cash incentives to take risks with other people's money, while imposing no penalties for any subsequent losses. Rajan warned that this bonus culture rewarded bankers for actions that could destroy their own institutions, or even the entire system, and that this could generate a 'full-blown financial crisis' and a 'catastrophic meltdown.'

When Rajan finished speaking, Summers rose up from the audience and attacked him, calling him a 'Luddite,' dismissing his concerns, and warning that increased regulation would reduce the productivity of the financial sector. (Ben Bernanke, Tim Geithner, and Alan Greenspan were also in the audience.)

Amazingly, rather than ending up an economic pariah after that, Summers regained power over the economy in the last few years.

Then, after the 2008 financial crisis and its consequent recession, Summers was placed in charge of coordinating U.S. economic policy, deftly marginalizing others who challenged him. Under the stewardship of Summers, Geithner, and Bernanke, the Obama administration adopted policies as favorable toward the financial sector as those of the Clinton and Bush administrations—quite a feat. Never once has Summers publicly apologized or admitted any responsibility for causing the crisis. And now Harvard is welcoming him back.

Summers was tightly aligned with the finance world, and benefited from the dominance of financial leaders on Harvard's board (see post here):

After Summers left the Clinton administration, his candidacy for president of Harvard was championed by his mentor Robert Rubin, a former CEO of Goldman Sachs, who was his boss and predecessor as treasury secretary. Rubin, after leaving the Treasury Department—where he championed the law that made Citigroup's creation legal—became both vice chairman of Citigroup and a powerful member of Harvard's governing board.

Yet in between his government and academic leadership roles, Summers got rich from finance firms' money.

Summers became wealthy through consulting and speaking engagements with financial firms. Between 2001 and his entry into the Obama administration, he made more than $20-million from the financial-services industry. (His 2009 federal financial-disclosure form listed his net worth as $17-million to $39-million.)

Ferguson went on to list several other conflicted academic economists:

The route to the 2008 financial crisis, and the economic problems that still plague us, runs straight through the economics discipline. And it's due not just to ideology; it's also about straightforward, old-fashioned money.

Prominent academic economists (and sometimes also professors of law and public policy) are paid by companies and interest groups to testify before Congress, to write papers, to give speeches, to participate in conferences, to serve on boards of directors, to write briefs in regulatory proceedings, to defend companies in antitrust cases, and, of course, to lobby. [Ed: they are thus the "key opinion leaders" of economics and economic policy.]  This is now, literally, a billion-dollar industry. The Law and Economics Consulting Group, started 22 years ago by professors at the University of California at Berkeley (David Teece in the business school, Thomas Jorde in the law school, and the economists Richard Gilbert and Gordon Rausser), is now a $300-million publicly held company. Others specializing in the sale (or rental) of academic expertise include Competition Policy (now Compass Lexecon), started by Richard Gilbert and Daniel Rubinfeld, both of whom served as chief economist of the Justice Department's Antitrust Division in the Clinton administration; the Analysis Group; and Charles River Associates.

In my film you will see many famous economists looking very uncomfortable when confronted with their financial-sector activities; others appear only on archival video, because they declined to be interviewed. You'll hear from:

Martin Feldstein, a Harvard professor, a major architect of deregulation in the Reagan administration, president for 30 years of the National Bureau of Economic Research, and for 20 years on the boards of directors of both AIG, which paid him more than $6-million, and AIG Financial Products, whose derivatives deals destroyed the company. Feldstein has written several hundred papers, on many subjects; none of them address the dangers of unregulated financial derivatives or financial-industry compensation.

Glenn Hubbard, chairman of the Council of Economic Advisers in the first George W. Bush administration, dean of Columbia Business School, adviser to many financial firms, on the board of Metropolitan Life ($250,000 per year), and formerly on the board of Capmark, a major commercial mortgage lender, from which he resigned shortly before its bankruptcy, in 2009. In 2004, Hubbard wrote a paper with William C. Dudley, then chief economist of Goldman Sachs, praising securitization and derivatives as improving the stability of both financial markets and the wider economy.

Frederic Mishkin, a professor at the Columbia Business School, and a member of the Federal Reserve Board from 2006 to 2008. He was paid $124,000 by the Icelandic Chamber of Commerce to write a paper praising its regulatory and banking systems, two years before the Icelandic banks' Ponzi scheme collapsed, causing $100-billion in losses. His 2006 federal financial-disclosure form listed his net worth as $6-million to $17-million.

Laura Tyson, a professor at Berkeley, director of the National Economic Council in the Clinton administration, and also on the Board of Directors of Morgan Stanley, which pays her $350,000 per year.

Richard Portes, a professor at London Business School and founding director of the British Centre for Economic Policy Research, paid by the Icelandic Chamber of Commerce to write a report praising Iceland's financial system in 2007, only one year before it collapsed.

And John Campbell, chairman of Harvard's economics department, who finds it very difficult to explain why conflicts of interest in economics should not concern us.

I once naively thought that the primary conflict of interest problems affecting academia involved health care, the dependence of medical schools and academic medical centers on commercial research funding, the emphasis these schools placed on faculty ties to commercial firms, leading to faculty "key opinion leaders" functioning as marketers of drugs and devices operating under the cloak of academia, and the major conflicts of academic leaders who also sit on health care corporate boards.

Now I wonder if all this came to pass because academic leaders already were comfortable with conflicts of interest after having profited from conflicts generated by relationships with the finance industry.

This now suggests that the dominance of university boards of trustees by finance leaders is a conflict of interest issue, too.

It also suggests that we in medicine should be paying more attention to how conflicts of interest shape not only the marketing of drugs and devices, but the health care policy that has lead to our currently dysfunctional system. If economists paid by finance companies could have been a major cause of the global financial meltdown, could health care policy experts paid by health care corporations be a major cause of our collapsing health care system?

Hat tip to the Naked Capitalism blog. See additional comments on the University Diaries blog and on Felix Salmon's blog.

Hospitals' Star-Crossed Financial Engineering

And speaking of the costs of financial maneuvering by hospitals, the Wall Street Journal just reported on "Hospitals' Wall Street Wounds,"

Hospitals nationwide are tangling with Wall Street to get out of disastrous wagers that have complicated their financial problems.


Some hospitals are paying millions of dollars in penalties to get out of derivatives contracts, after betting incorrectly that interest rates would rise. Other hospitals are paying higher interest rates. At many, these ill-fated financial bets have contributed to layoffs and scuttled projects.


More than 500 nonprofit hospitals—at least one in six—bought interest-rate "swaps" in a bid to lower their borrowing costs, estimates Municipal Market Advisors, a Concord, Mass., consulting firm. The swaps allowed hospitals to act much like homeowners switching from a floating-rate mortgage to fixed-rate one, betting on rising interest rates.

For a fee, the hospitals received a fixed rate to sell bonds, lower than the municipal-bond market at the time. These bets backfired when the Federal Reserve cut interest rates to nearly zero from more than 5% in 2007.

Hospitals also issued auction-rate securities—which reset bond prices weekly or monthly through auctions—that represented about a third of the $330 billion market for these derivatives. Hospitals paid Wall Street firms more than $120 million in fees for the securities between 2005 and 2007, said data firm Thomson Reuters. That market dried in the 2008 financial panic, leaving hospitals with higher interest rates.

The article included a few pointed examples, e.g.,

In April 2007, Smith Barney brokers pitched Tri-City Medical Center in Oceanside, Calif., on ways to save money on interest rates. In a presentation, the brokers argued that the hospital could save tens of millions of dollars by refinancing its debt with derivatives from parent Citigroup, according to a lawsuit filed in April 2010 against Citigroup and Smith Barney, now co-owned by Morgan Stanley.

'Historically low' interest rates created an 'optimal environment,' according to Citigroup documents reviewed by The Wall Street Journal. 'Citigroup can mitigate the primary risks,' according to a slide presentation.

Persuaded that it could cut its interest rate—5.7% at the time—on $67 million in outstanding bonds, the hospital issued auction-rate securities and added interest-rate swaps, according to the lawsuit and Daniel Callahan, an attorney for the hospital.

Soon, the auction-rate market collapsed. Investors stopped bidding on these securities and the banks that sold them stopped acting as a buyer of last resort as they had in the past. This forced many hospitals and other issuers to pay a maximum penalty rate—sometimes up to 20%—that kicks in if there aren't buyers.

As a result, rates shot up to 17%, costing Tri-City some $16 million more than it would have paid under its old rates, according to the lawsuit, filed in California Superior Court in Orange County.

The hospital board replaced many top officials and paid Citigroup more than $6 million to get out of the auction-rate securities and the interest-rate swaps, Mr. Callahan said.

The loss 'continues to impact Tri-City's ability to meet the needs of the entire community,' Mr. Callahan said, delaying the expansion of services and capital improvements.

Auction-rate securities 'were an engineered, artificial market supported by the activities of the investment bankers designed to postpone a collapse,' the hospital alleges in the lawsuit.

At least one financial expert agreed:

'Financial engineering by Wall Street has been a huge part of hospital's financial problems and has even translated into a lack of hospital beds,' said Brian McGough, a managing director of health-care investments at Bank of Montreal Capital Markets in Chicago.

This is another example of how health care organizations, including respected not-for-profit institutions, jumped headlong into the transactions first economy of the last 20 plus years.  The were lured by the prospect of making easy money from financial transactions.  However, it looked like those who really made money were the middle men who sold everyone on the magic of derivatives.

You would have thought that the highly compensated financial wizards that hospitals and other health care not-for-profits chose for their leaders in the last 20 plus years would have been able to see through such nonsense.  Why were they paid so much, if not for expertise in this area?  But I would suspect that they too became distracted by all the money floating their way to think about how it might end. 

We have often decried the problems of ill-informed health care leaders who do not have direct experience in actually providing health care, or much sympathy for the values of health care professionals.  Breaking the medical "guild," and putting professional managers in charge of health care was once touted as a way to control costs.  It is ironic that after  health care organizations became sold on the uncanny abilities of managers with business, usually finance or marketing training, these geniuses turned out to be as gullible about the wonders of Wall Street as everyone else. 

Failed Leaders of Citigroup as Leaders of Health Care

When we began this blog, I never dreamed I would do so much writing about finance and the financial services sector of the economy, but,... 

The Governance of Citigroup

The discussions and revelations generated by the global financial collapse/ great recession continue to provide insights into the ongoing health care crisis.  Let me start with a small item from the Dow Jones Newswire this week:

The California Public Employees' Retirement System said it opposes the re-election of two Citigroup Inc. (C) directors, in part because of their roles in the recent financial crisis.

The nation's largest public pension fund, which owns about 61.2 million Citigroup shares, plans to cast 'withhold' votes for board nominees Andrew Liveris, chairman and chief executive of Dow Chemical Co. (DOW), and Judith Rodin, Rockefeller Foundation president, at the annual shareowners meeting Tuesday.

Both served on the company's audit and risk committee before the financial crisis. During the crisis, the banking giant accepted a total federal government infusion of $45 billion, which it has repaid.

'It's time for new blood in the boardroom,' said Anne Simpson, the senior portfolio manager who heads the Calpers corporate governance program....

Let me back up a bit.

The near-failure of global banking giant Citigroup, prevented only by a massive US government bail-out, was one of the central components of the global financial collapse. We noted recently how Mr Robert Rubin, one of the key leaders of Citigroup was accused of "being asleep at the switch," "irresponsibility and misjudgment," and being a "very well paid boob" after his testimony at hearings by the committee investigating the collapse. We also noted his link to health care. As senior member of the Harvard Corporation, Rubin is one of six top stewards of the US' oldest and arguably most presigious university, containing one the country's most prestigious medical schools and teaching hospitals.

Although all those who were members of the Citigroup at the time it collapsed have not been hauled in front of the committee, there has been considerable discussion of their responsibility for the company's failures. For example, in 2008, soon after the government rescue of Citigroup began, the Wall Street Journal published an editorial:

"Citi never sleeps," says the bank's advertising slogan. But its directors apparently do. While CEO Vikram Pandit can argue that many of Citi's problems were created before he arrived in 2007, most board members have no such excuse. Former Treasury Secretary Robert Rubin has served on the Citi board for a decade. For much of that time he was chairman of the executive committee, collecting tens of millions to massage the Beltway crowd, though apparently not for asking tough questions about risk management.

Chairman Sir Win Bischoff has held senior positions at Citi since 2000. Six other directors have served for more than 10 years -- including former CIA Director John Deutch, Time Warner Chairman Richard Parsons, foundation executive Franklin Thomas, former AT&T CEO C. Michael Armstrong, Alcoa Chairman Alain Belda, and former Chevron Chairman Kenneth Derr.

When taxpayers are being asked to provide the equivalent of $1,000 each in guarantees on Citi's dubious investments, how can these men possibly say they deserve to remain on the board?

While other banks can claim to be victims of the current panic, Citi is at least a three-time loser. The same directors were at the helm in 2005 when the Fed suspended Citi's ability to make acquisitions because of the bank's failure to adhere to regulatory and ethical standards. Citi also needed resuscitation after the sovereign debt disaster of the 1980s, and it required an orchestrated private rescue in the 1990s.

Last year, as reported by Bloomberg,

Citigroup Inc. investors should vote against re-electing four of 14 board members, including John Deutch and Michael Armstrong, to improve management of the company’s risks, a shareholder advisory group said.

Deutch, former U.S. Central Intelligence Agency director, Armstrong, former AT& T Inc. chief executive officer, and Alain Belda, chairman of Alcoa Inc., should be opposed 'for poor risk oversight,' RiskMetrics Group Inc.’s ISS Governance Services said today. Xerox Corp. CEO Anne Mulcahy shouldn’t be re-elected because she sits on more than three boards, which may limit her effectiveness, the group said.

'The pattern of chronic oversight failure at Citi and the magnitude of the corresponding shareholder losses warrant removal from the board of directors most responsible for risk oversight,' RiskMetrics said in the statement.

Furthermore,

'Despite the fact that the board has many incumbent directors that have been successful in their respective fields and have been on the board for some time, their track record taken as a whole is dismal given that the company is currently surviving on federal assistance,' RiskMetrics said.

Rick Conrad, of the Seeking Alpha blog, thus berated the CEO of Citigroup at its 2009 shareholders meeting,

Mr. Armstrong, who has been a director since 1989 is no longer part of the Audit Committee, as of this year, continues his 'service' to our Company on the Nomination as well as the Compensation Committee. Much as this company has suffered under an illusion of prosperity, it appears to continue to suffer under an illusion of competence.

John [Deutch] has served on the Audit Committee of our Company since 1997 and hence, likely drank the Kool-Aid as to the Illusion of Prosperity.

I note that the audit and risk management committee has many members who, like Mr Deutch and MrArmstrong presided over this seemingly out of control disaster.

Andrew Liveris since 2005 on Audit

Ann Mulcahy since 2007 on Audit

Dr Judith Rodin since 2004 on both Executive and Audit Committees.

Overlaps Among Citigroup's Board and Health Care Organizations' Leadership
So there seems to be good reason to believe that the board of Citigroup at the time the firm collapsed were a collective example of inattentive goverance and poor stewardship. We have previously documented overlaps among poor governance and leadership of finance, and the governance and leadership of health care, suggesting that the poor leadership and governance of the latter may be in part a result of infection from the former. So I looked for overlaps among the Citigroup board and health care organizational leadership.

A list of the membership of the failed board comes from the 2008 Citigroup proxy statement.  The biographies provided therein, supplemented with some Google searching, produced the following overlaps:

- C Michael Armstrong - is also Chairman, Johns Hopkins Medicine, Health Systems and Hospital

- Alain J P Belda - was a Trustee and member of the Corporation of Brown University (including the Warren Alpert Medical School) (see link).  (He stepped down prior to 2009 at an unknown time.)

- Sir Winfried Bischoff, Chairman of the Board - is a director of Eli Lilly and Co.

- Kenneth T Derr - is a director of the University of California San Francisco Foundation.

- John M Deutch - no overlap found

- Roberto Hernandez Ramirez - no overlap found

- Andrew N Liveris - is a Trustee of Tufts University (including the School of Medicine and Tufts- New England Medical Center)

- Anne M Mulcahy - in 2009, was appointed to the Board of Directors of Johnson and Johnson (see link)

- Vikran S Pandit, CEO - is a Trustee of Columbia University (including the College of Physicians and Surgeons and Columbia University Medical Center)

- Richard D Parsons - is a Trustee of Howard University (including the College of Medicine and Howard University Hospital)

- Judith Rodin - is President of the Rockefeller Foundation

- Robert E Rubin - is a member of the Harvard Corporation (including Harvard Medical School and multiple Harvard teaching hospitals), and a Trustee of Mount Sinai Medical Center

- Robert L Ryan - was a director of UnitedHealth Group, is a Trustee of Cornell University (including Weill Cornell Medical College, and Weill Cornell Medical Center), and was a Senior Vice President and CFO of Medtronic

- Franklin A Thomas - no overlaps found

Summary

So in summary, of 14 board members, 2 are trustees of major medical centers (Johns Hopkins and Mount Sinai), 6 were or are trustees or equivalent of universities that include medical schools and medical centers (Brown, Tufts, Columbia, Howard, Harvard and Cornell), one is a trustee of such a university's foundation (University of California San Francisco Foundation), 2 are or would be board members of pharmaceutical corporations (Eli Lilly and Johnson and Johnson), one was a board member of a commercial managed care organization/ health insurance company (UnitedHealth), one was a former top executive of a medical device company (Medtronic), and one is the President of a large charitable foundation which historically has supported multiple medical and public health initiatives (Rockefeller Foundation).  Only 3 of 14 did not have a major leadership role of a health care organization.  

Most of these health care organizations have been involved with cases we have discussed on Health Care Renewal (see links above).

Given the seriousness of the failure of Citigroup, one has to wonder why so many of the directors who presided over it still have such influential positions in health care organizations?

As we have pointed out, as the world economy was driven to near ruin by "masters of the universe," some of the same also became leaders of academia and academic medicine in their spare time. Maybe this made sense 10 or 20 years ago, but why does it still make sense? On the other hand, now that we understand how bad the leadership of finance really was, it is a little easier to understand why the leadership of health care has become so bad. Iit seems reasonable to hypothesize that some of the problems of academia, and particularly the problems of medical academia, may have been at least enabled by leadership more used to working in an increasingly amoral marketplace than to upholding the academic mission.  The failures of the leadership and governance of finance thus suggest we need to re-examine the leadership of health care.

A "Very Well Paid Boob" on the Harvard Corporation?

The ongoing investigation of the global financial collapse may also shed some indirect light on what has gone wrong with health care.  Consider the recent testimony by two leaders of the nearly failed, then bailed out global financial giant Citigroup, as reported by the New York Times. One of the leaders was Robert Rubin,

Robert E. Rubin, the former Treasury secretary, faced withering questions from the panel, the Financial Crisis Inquiry Commission, for his spare expressions of remorse. Repeatedly playing down his role as chairman of the executive committee of Citigroup’s board, he was met with anger and disbelief.

'You were either pulling the levers or asleep at the switch,' Philip N. Angelides, the committee’s chairman, told him.

Mr. Rubin stopped short of accepting personal responsibility. He grudgingly conceded that a few savvy investors saw the crisis coming, asserting that nearly everyone in the financial services industry had failed to see a dozen powerful forces — from excessive debt levels to trade imbalance — come together in a perfect storm.

'We all bear responsibility for not recognizing this, and I deeply regret that,' Mr. Rubin said.

Mr. Rubin’s stance left several members of the panel angry. Mr. Rubin earned more than $100 million during a decade at Citigroup.

Mr. Angelides, a former California state treasurer and a fellow Democrat, did not buy it. 'You were not a garden-variety board member,' he said. 'I think to most people chairman of the executive committee of the board of directors implies leadership. Certainly $15 million a year guaranteed implies leadership and responsibility.'

Attempts by Mr Rubin (and to some extent, former Citigroup CEO Charles O Prince III) to disavow responsibility met with more derision. For example, yesterday, see a New York Times editorial:

The latest public hearings of the Financial Crisis Inquiry Commission, held last week, made headlines for eliciting more apologies from financiers who presided over the market collapse.

You may recall a similar flurry last year, when Lloyd Blankfein, the chairman and chief executive of Goldman Sachs, was widely credited for having apologized for his firm’s role in the financial crisis.

We did not buy it then; Mr. Blankfein never said what he was sorry for or to whom he was apologizing. And we are not buying it now.

Mr. Prince says he 'could not' foresee the impending collapse, when he could have and should have seen it coming. Certainly, others did. Mr. Rubin has said that under his employment agreement, he was not responsible for the bank’s operations. But he was a towering figure at Citi, a source of its credibility and prestige. That implies responsibility, no matter what his contract said. Add all that to the 'I wasn’t the only one' context of both men’s comments, and their regret translates as, 'We feel bad about an accident we were powerless to prevent.'

Except that the financial crisis was not an accident and they were not powerless. The crisis was the result of irresponsibility and misjudgments by many people, including Mr. Prince and Mr. Rubin. Citi, under their leadership, epitomized the financial recklessness that ruined the economy.

A Seattle Times columnist was even more harsh, calling Rubin a "very well paid boob," and:

Rubin was barely contrite and went back to his meme of 'who knew?,' adding the unintended comedic line about how leaders shouldn't be responsibility for the 'granularity' of little things -- such as $40 billion in essentially fraudulent collateralized debt obligations. Rubin was being paid more than $100 million as a senior adviser to Citi while it headed toward collapse and a $45 billion taxpayer rescue. So 'granularity' is in the eye of the beholder.

Commission vice chairman Bill Thomas said, 'Apparently you get to the top without having had to experience anything the people underneath you do. You don't have a comprehension. You're not informed, but you get to make all this money on the upside, but there's no downside.'

Indeed. Rubin and Citigroup epitomize the public policies and the corporate practices that brought the economy to the brink of a new depression.

As Bill Clinton's Treasury Secretary, Rubin championed financial deregulation and the financialization of the economy as manufacturing was hollowed out. Among other things he helped keep derivatives from being regulated and encouraged the creation of 'too big to fail' institutions such as Citi. Rubin led the battle to dismantle Glass-Steagall, so Citi and its giant siblings could gamble in investment banking, while also doing commercial banking and insurance. An alum of Goldman Sachs, Rubin was fine with big compensation for executives, even if their leadership wrecked the bank (Prince walked away with $120 million). Funny how Rubin was offered the lucrative Citi position after he left such 'government service.'

So what does this tell us about health care? As we noted before, while Robert Rubin is no longer on the board of Citigroup, he has been a member of the Harvard Corporation since 2001. The Corporation is ultimately responsible for the US' oldest and most prestigious university, its equally prestigious medical school and teaching hospitals. Yet under Rubin's stewardship, Harvard's endowment has fallen a prodigious amount, and Harvard and its Partners Healthcare hospital system have faced charges of conflicts of interest and various sweetheart deals. Perhaps this is to be expected when the ultimate steward may be a "very well paid boob."

While Rubin's impressive resume and wealth in 2001 may have provided a rationale for his appointment to the Corporation, what would be the rationale for his continuing service?

As we have pointed out, as the world economy was driven to near ruin by "masters of the universe," some of the same also became leaders of academia and academic medicine in their spare time. Maybe this made sense 10 or 20 years ago, but why does it still make sense? On the other hand, now that we understand how bad the leadership of finance really was, it is a little easier to understand why the leadership of health care has become so bad.