In My Time (80 page)

When I met President Karzai in Kabul, he expressed his gratitude for American support. He told me of the time he had spent as a refugee,
living in a camp in Pakistan and traveling across the border into Afghanistan, trying to convince the tribal leaders to take on the Taliban regime. He said the one question they always asked was “Have you got the Americans with you?” He said the tribal leaders would take on the fight when they knew they could count on us to back them. He felt that President Bush’s decision to increase troop levels as well as commit close to $11 billion in additional reconstruction aid sent a very clear signal that we were with him. Karzai had his difficulties, however, some of his own making and many not.

There were several reasons for the significant challenges we faced and continue to face in Afghanistan. First, the country’s geography, history, tribal society, and extreme poverty all combine to make it a very difficult place to govern. Second, it is the largest producer of heroin in the world, single-handedly meeting the demand in Europe. The poppy industry generates cash that funds warlords and encourages corruption. Third, extreme poverty makes the task of building a sovereign, free, secure nation much more difficult in many ways than it was in Iraq, where there is more than a 100 billion–barrel oil reserve. In recent months there has been a significant discovery of mineral deposits in Afghanistan. I am hopeful that this find can someday provide the resources Afghanistan needs to thrive. Fourth, our multilateral method of operating in Afghanistan carries with it both strengths and weaknesses. We have had many courageous allies fighting alongside us, but some of the rules of engagement imposed on their forces by home governments have made it difficult to count on them in a pinch. I remember one colonel explaining to me the dismay of American troops when they called in air strikes only to have a French Mirage jet conduct the equivalent of an unarmed flyover.

It is also the case that arrangements we had agreed to in 2002 for dividing up the responsibilities for reconstruction turned out to be less effective than we had hoped. Some governments failed to follow through on their commitments, which left large segments of the reconstruction undone or underfunded.

Finally, and most important, is the problem of Pakistan. It is worth remembering that before 9/11, it was one of only three governments
in the world that recognized the Taliban. Musharraf formally cut those ties, and the Pakistanis worked with us to capture some of the most important leaders in the War on Terror, including Khalid Sheikh Mohammed and Abu Zubaydah. But a large and active extreme Islamist segment of the population was incensed by Pakistan’s cooperation with the United States, and Musharraf became an assassination target. He survived two attempts on his life within eleven days in December 2003. Within the Pakistani government, there were also some who continued to support the Taliban, which, among other things, hindered efforts to clear out the tribal areas. Al Qaeda had its sympathizers, too, as Osama bin Laden’s presence in Abbottabad for some six years seems to suggest.

After my visit with Musharraf in 2007, his position grew increasingly weak. He suspended the chief justice of Pakistan’s Supreme Court, which brought thousands of protestors into the streets. In November 2007, he suspended Pakistan’s constitution and declared emergency rule. He lifted it on December 15, promising to go ahead with free and fair elections. Then, on December 27, 2007, former Prime Minister Benazir Bhutto, who had returned to Pakistan to lead her party in the parliamentary elections, was assassinated. The following year, Musharraf was voted out of office. He was succeeded by Asif Ali Zardari, the widower of Benazir Bhutto.

Our efforts in Afghanistan continued to be hindered by the safe haven that the Taliban and al Qaeda found in Pakistan. We ramped up our use of armed drones—unmanned aerial vehicles—and the president asked his national security team to conduct a review of Afghanistan, similar to the one we had done for Iraq in 2006. The results of the review, which was completed after the 2008 election, called for more resources and a focus on counterinsurgency. The president asked Steve Hadley to talk to General Jim Jones, his counterpart in the incoming Obama administration, to tell him about the review and to let him know we could either release the results publicly or pass them quietly to the incoming team so they could use them without politics getting in the way. General Jones asked that we pass along the report quietly,
which we did. In light of that, I was somewhat surprised the following year to hear Obama chief of staff Rahm Emanuel assert that we had
left them with no plan
.

For the most part, our efforts in Afghanistan had received backing from both sides of the aisle. Democrats who would oppose us every step of the way in Iraq would be with us on Afghanistan. In one meeting the president hosted of senior national security officials and congressional leaders, House Majority Leader Steny Hoyer spoke up to express his strong support. “We can all agree with you on this,” he said. “This is where we should be focused, where the War on Terror started.”

I thanked him for his support, but noted that we couldn’t expect to fight and win this war if we viewed Afghanistan as the only legitimate front. “National boundaries just don’t mean much to the terrorists,” I noted. I cited the example of the terrorist we had recently captured who was Iraqi by birth and had spent a number of years training in Afghanistan. He then traveled to Turkey and was now in our custody back in Afghanistan. I also cited Abu Musab al Zarqawi, who was Jordanian by birth, ran a terrorist training camp in Afghanistan for a number of years, and whom we had eventually killed in Iraq. It simply didn’t make sense from a strategic or operational perspective to say “We’re with you in Afghanistan, but we’re not going to fight this global war anyplace else,” which is what a number of the Democrats seemed to be saying.

It was with support from both Democrats and Republicans that President Obama ordered a surge of 33,000 troops to Afghanistan at the end of 2009. We subsequently made significant progress toward defeating the Taliban in southern Afghanistan, and our commanders had planned on having the additional troops available through a second fighting season so that they could focus their efforts on Taliban and al Qaeda strongholds in the eastern part of the country. That plan is now in jeopardy, however. As I was working on this book in the summer of 2011, President Obama announced he would have 33,000 troops out of Afghanistan by September 2012. He will be pulling them out in the middle of next year’s fighting season.

There does not appear to be any military rationale for the timetable
the president announced. Rather, the timing seems to be driven by the calendar for next year’s presidential election. President Obama appears determined to have the surge forces out before Americans go to the polls.

The Obama strategy is likely to have devastating consequences, not only in Afghanistan but throughout the region. People who have been willing to put their lives at risk to work with the United States and confront the Taliban and other terrorist organizations will now reconsider their alliance with Amerian forces. Members of the NATO alliance are likely to withdraw their forces even more rapidly than the United States does. The ability of the United States to influence events throughout the region in places such as Pakistan, Iraq, and Iran will be significantly diminished.

It is impossible for me not to make a comparison with George Bush in 2007. When President Bush surged troops into Iraq, he encountered significant pressures to reverse course, but he continued in the face of opposition, increasing American forces in order to implement the counterinsurgency strategy that enabled us to prevail. He did not allow domestic political considerations to interfere with his responsibilities as commander in chief.

PRESIDENT BUSH AND I had come into office dedicated to the proposition that cutting taxes and getting more money back into the hands of private individuals and businesses was the best way to encourage economic growth. We had secured two major rounds of tax cuts, the first in 2001 and the second in 2003, and they had helped spur growth and create jobs. This accomplishment was particularly notable against the backdrop of the attacks of 9/11, which had a major negative impact on the economy, and the subsequent costs of fighting the War on Terror and keeping the nation safe.

We were also committed to keeping spending down—a task we sometimes performed better than others. One innovation we put in place at the beginning of the administration was a budget review panel, which I chaired. Cabinet secretaries were not always happy when they heard from the Office of Management and Budget what their allotment
would be for the year, and the panel, made up of the White House chief of staff, the director of the OMB, and me, was a place where they could appeal. The panel worked well, and did not have to meet very often, particularly after one cabinet member made an appeal that resulted in her budget numbers being lowered.

THE REASONS FOR THE financial crisis of 2008 are likely to be long debated. Many of the analyses I’ve read or watched on TV strike me as oversimplified, more interested in pointing out villains—greedy bankers or feckless deregulators—than in coming to a true understanding. One analysis I have found particularly thoughtful is the minority view in the
Financial Crisis Inquiry Report
of 2011. In it, commissioners Keith Hennessey and Douglas Holtz-Eakin and commission vice chairman Bill Thomas note a complexity of factors, including a surge in housing prices that was accompanied by a surge in mortgage lending. Convinced that housing prices would continue to escalate, both lenders and borrowers were willing to enter into mortgage agreements that were not sustainable. The idea was that the growth of home equity would enable buyers to refinance into loans they could carry for the long term. Mortgage lenders were particularly encouraged to discount the risk involved because they sold the mortgages and did not ultimately have to bear
whatever losses they produced
.

Government-sponsored entities Fannie Mae and Freddie Mac, along with companies in the private sector, combined mortgages, many of them high-risk, into mortgage-backed securities. Credit agencies gave these securities unduly high ratings, and too many institutions and investors failed to inquire as diligently as they should have into the risk they were assuming. Some institutions made big bets on mortgage-backed securities, and when the housing bubble burst, they suffered massive losses. Such losses, combined with heavy leveraging, brought the investment bank Bear Stearns to the edge of bankruptcy in March 2008. JPMorgan agreed to step in and acquire Bear Stearns, but only after Treasury Secretary Hank Paulson, working with Tim Geithner, then head of the Federal Reserve Bank of New York, and Ben Bernanke,
chairman of the Federal Reserve, agreed to a $30 billion loan as part of the sale.

Mortgage giants Fannie Mae and Freddie Mac were also in trouble. For years Alan Greenspan had been warning about the unwarranted risks they were taking and the potential fallout. Small-town banks all over America held paper issued by Fannie Mae and Freddie Mac to meet their capital requirements. If Fannie and Freddie failed, there would be a systemic failure. It was also the case that Fannie’s and Freddie’s mortgage-backed securities were held around the world by investors who believed they were guaranteed by the United States government. Should Fannie or Freddie fail, an international crisis would ensue. In 2003, the administration had put forward legislation, which was blocked by Barney Frank, Democratic chairman of the House Banking Committee, that would have reformed these institutions and strengthened governmental regulations of their activities. We put forward similar legislation again in 2005, and again it was blocked by Fannie Mae and Freddie Mac lobbyists and supporters, particularly in the Democratic caucus on Capitol Hill.

Finally, in July 2008, with the financial crisis looming, legislation that provided for regulation was passed, and it brought about a careful examination of Fannie’s and Freddie’s books. Treasury Secretary Paulson recommended taking both institutions into government conservatorship, the president approved, and on September 7, the government took control.

But there seemed no end to the crisis. Lehman Brothers, another major American financial institution, was on the brink of collapse, and we had to decide whether to step in and keep it afloat. The key was finding an interested buyer, but it turned out there wasn’t one. Lehman declared bankruptcy on September 15, 2008. Some have charged that letting Lehman go under was a grave error that somehow caused the financial crisis, but as Hank Paulson and others have pointed out, there was no legal, workable way to save Lehman. Moreover, the events of September 2008 followed upon one another in such rapid succession that no single event can be said to have precipitated them.

On the weekend of the Lehman failure, Merrill Lynch agreed to be purchased by Bank of America on the following Tuesday, in order to prevent the failure of American International Group, a huge international insurance and financial firm that had insured mortgage-backed obligations. The Federal Reserve stepped in with an $85 billion loan, in exchange for which the U.S. government assumed ownership of nearly 80 percent of AIG.

It was clear that what we were facing called for more than individual interventions, particularly as it became apparent that America’s credit markets were shutting down. Huge companies with top credit ratings, such as General Electric, were unable to meet their short-term capital requirements. One money market fund “broke the buck”—was unable to return at least a dollar for every dollar invested. And the ramifications were economy-wide. People often talk about the difference between Wall Street and Main Street, but in this instance, credit was becoming a problem for everyone from GE to the businesswoman who owned a McDonald’s franchise. This crisis was going to affect not only CEOs, but also retirees depending on their 401(k)s. I thought of my great-grandfather, Samuel Fletcher Cheney, who in 1896 had lost his homestead when he couldn’t borrow money. I thought of my grandfather who’d lost almost everything when his bank failed at the beginning of the Great Depression. What the United States was facing in September 2008 had the potential to devastate Americans in all walks of life, just as the Great Depression had.