[Speed Gibson,
Monday September 12, 2005 at 9:40am]
Fast Money
A common assumption in the blame games going on over hurricane Katrina is that the Federal government, with all that money, resources, people, and power, can respond almost immediately, even when the state and local officials are in your way. But in almost every hierarchy other than Congress itself, more money is accompanied by more controls.
Picture a private company. You spend $10 for dinner when you have to work late supervising an equipment repair. You boss expenses it even without a receipt. You spend $100 on a couple of technical manuals for that equipment. Again, the boss expenses it, but wants a receipt, maybe a short explanation justifying the expense for his boss.
You want to spend $1,000 to bring in a consultant to examine this troublesome machine. Company fiscal controls kick in, requiring pre-approval. You want to spend $10,000 to refurbish the machine. Now you must also price out alternatives such as buying new or getting by until next year.
You want to spend $100,000 to buy a new machine. Your boss now has to sell it to his or her boss. You want to spend $1,000,000 to build a new plant, not just the machine. It has to go before the Board of Directors. You want to spend $10,000,000 to buy the company that makes this critical machine. You have to be on the Board of Directors.
At each level, the amount of paperwork and level of approval rises, by necessity, so that a large purchase or a number of smaller ones don't threaten the liquidity of the business. The same applies at home. If you did all the home improvements you could think up all at once, you'd likely be filing bankruptcy before long.
Thus, for FEMA to spend a significant portion of its budget necessarily requires more approvals and review, and that's a good thing. Katrina will like exceed FEMA's entire budget, so an Act of Congress is also required. Were that they were as careful.
Picture a private company. You spend $10 for dinner when you have to work late supervising an equipment repair. You boss expenses it even without a receipt. You spend $100 on a couple of technical manuals for that equipment. Again, the boss expenses it, but wants a receipt, maybe a short explanation justifying the expense for his boss.
You want to spend $1,000 to bring in a consultant to examine this troublesome machine. Company fiscal controls kick in, requiring pre-approval. You want to spend $10,000 to refurbish the machine. Now you must also price out alternatives such as buying new or getting by until next year.
You want to spend $100,000 to buy a new machine. Your boss now has to sell it to his or her boss. You want to spend $1,000,000 to build a new plant, not just the machine. It has to go before the Board of Directors. You want to spend $10,000,000 to buy the company that makes this critical machine. You have to be on the Board of Directors.
At each level, the amount of paperwork and level of approval rises, by necessity, so that a large purchase or a number of smaller ones don't threaten the liquidity of the business. The same applies at home. If you did all the home improvements you could think up all at once, you'd likely be filing bankruptcy before long.
Thus, for FEMA to spend a significant portion of its budget necessarily requires more approvals and review, and that's a good thing. Katrina will like exceed FEMA's entire budget, so an Act of Congress is also required. Were that they were as careful.