No bailout in Afghanistan
Q: In confronting the issue of Gen. McChrystal's apparent insubordination, did President Obama have any choice but to remove him? Going forward, what can Gen. Petraeus do to overcome this dramatic shakeup and keep his troops reassured and on mission?
Losing a leader in the home stretch of a long and complicated effort is rarely a net positive. A new leader will inherit a situation and a strategy that he did not create but must execute. The departing leader may be so entrenched that the mission falls apart when he is removed - like playing Jenga. Deciding whether a leader can safely be removed requires clear priorities and an in-depth understanding of the risks to the overall mission.
An example of the potential consequences of this decision is the leadership fallout at Freddie Mac from their financial restatement. Freddie Mac fired CEO Leland Brendsel, President David Glenn and CFO Vaughn Clarke. In the wake of the Enron debacle, as part of Sarbanes-Oxley regulations, there was a big push to hold the chief executives of a company accountable for their financial statements. Leland was the chief architect of Freddie and successfully managed the tension between their public mission to maintain liquidity in the mortgage market and their fiduciary duty to their shareholders. An entirely new leadership team was brought in with no prior experience in Freddie's business model. Without Leland's vision and without understanding enough about the risks and operations of Freddie's business, the new leadership was utterly unsuccessful and Freddie is now in receivership with the government - like a foreclosed property repossessed by the bank.
One could argue that it was an industry-wide problem, since Fannie Mae faced a similar fate. A quote about Daniel Mudd, the CEO who took over Fannie after Franklin Raines was ousted in the same accounting scandal, illustrates what happens when you lose sight of the mission: "He believes you make decisions based on business and the outside noise will take care of itself"
The question is: Which business did Daniel Mudd believe Fannie Mae was in - maintaining liquidity in the market or maximizing shareholder return? The subprime collapse and the resulting tsunami that washed away the mortgage-backed security market was part of an unprecedented financial crisis. But I would argue that replacing the leadership of Freddie Mac and Fannie Mae over ACCOUNTING without regard for their RISK MANAGEMENT strategies contributed to the severity and duration of the crisis.
There are parallels between the tensions at Fannie and Freddie and the current situation in Afghanistan. President Obama presumably replaced General McChrystal because he believed that the degradation of the chain of command posed too great a risk to the overall mission.
General Petraeus must now be VERY clear on the mission and strategy - is it counterinsurgency, is it troop withdrawal by a certain date, is it leaving Afghan leadership with control of their own security? He must maintain the support of the troops in the trenches and ensure the sacrifices made to date have not been in vain. The government bailed out and took over Freddie Mac and Fannie Mae when they failed - we don't have that option in Afghanistan.
June 25, 2010; 3:37 PM ET
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