But today, the Port Authority of New York and New Jersey doesn’t brag about the records it sets. One World Trade Center, born the Freedom Tower and taken over by the Port in 2006, will be the most expensive office building in the world. The “Vehicle Security Center,” an underground tour bus garage and road network serving the World Trade Center complex, may very well be the most expensive parking garage in history.

And then there’s the PATH station to New Jersey, the most troubled project at one of the world’s most troubled construction sites. At $3.74 billion, plus another $200 million in contingencies, the “Transportation Hub” at the World Trade Center—not even the busiest station in the Financial District—will be far and away the most expensive train station built in modern history.

The Hub, as it’s known in Port Authority speak, will be the crowning artistic statement of the World Trade Center complex, perhaps the last grand gesture at a site that was supposed to be full of them. “Let me draw for you what I cannot say,” its architect, Santiago Calatrava, said at the unveiling in 2004. Then, wrote Newsweek, “he fluently sketched a child releasing a bird—a spellbinding image that had inspired his design.”

When the grandiose ambitions and the emotions of 9/11 met with the famously flush Port Authority, disaster struck. Mission creep, an inattentive governor and extreme politicization sent costs skyward, eventually outstripping even the record-setting resources devoted to it. Its wings had to be stilled and its supports thickened, the bird in flight devolving into an immobilized stegosaurus. The world’s most expensive train station, it seems, was not expensive enough to contain all of New York’s dreams.

For nearly $4 billion, most cities could build entire subway lines. Even the MTA, which frequently breaks cost records of its own, managed to build its Fulton Center hub, a renovation of five densely tangled lines, for $1.4 billion. Nobody’s subway tunnels cost more than the MTA’s, but even they could fund most of the second phase of the Second Avenue subway, from 96th Street to 125th, with that kind of cash.

The World Trade Center PATH station is actually not a particularly busy one. “No one intelligently could say that the level of design and architecture associated with it was commensurate with the level of usage,” said one former commissioner. (Like nearly everyone we interviewed for this story, he would only speak on the condition of anonymity.)

The Port Authority likes to play up the significance of the station by calling it Manhattan’s third-largest transit hub. That’s a tenuous claim at best. Were the PATH system to be integrated into the New York City subway (no, nearly $4 billion does not buy a free transfer to the subway), the World Trade Center stop would barely crack the top 10 busiest stations.

Once a bird in flight, the Hub has devolved into an immobile, skeletal stegosaurus.

With its contribution to the project, which was supposed to cost it virtually nothing, ballooning to nearly $1 billion, the Port Authority now finds itself unable to fund the sorts of regional transportation projects that have traditionally justified its existence.

In 2009, to pay for ballooning World Trade Center costs, the Port cut $5 billion from its 10-year capital plan. That pleased the bond markets temporarily as Moody’s upgraded the Port Authority’s bond rating the next year, only to knock it down again in 2012 due to still-increasing World Trade Center costs and the fear that the Port’s seemingly limitless ability to raise bridge and tunnel tolls may in fact be limited.

From the proposed ARC rail tunnel beneath the Hudson into Midtown (canceled by Chris Christie in 2010) and an extension of the PATH train to Newark Liberty International Airport (at a cost of around $500 million) to a thorough renovation of La Guardia Airport ($1 billion in capital funding was cut in 2009), the region has needs, and the Port Authority is struggling to fund them.

Santiago Calatrava.

Any discussion of the cost of the Hub must start with Santiago Calatrava. He was given the job just two years after the attacks, when emotions were running high and George Pataki was eyeing a presidential bid. A starchitect of the highest order, Mr. Calatrava was known for his complex feats of engineering in fashioning soaring, animalistic structures, with a specialty in public works projects.

The architecture critics were smitten. The design, The New York Times’s architecture critic Herbert Muschamp wrote, “should satisfy those who believe that buildings planned for ground zero must aspire to a spiritual dimension,” and he hoped that New Yorkers would detect the “metaphysical element” in Mr. Calatrava’s work. His design was supposed to spur development throughout the neighborhood and lead lower Manhattan, still reeling from the attacks, out of its malaise. To the extent that the critics were worried, it was about how it would fit in with the architectural context of the site, not its cost.

Mr. Calatrava would eventually become to be remembered with regret among those in his hometown of Valencia, where his City of Arts and Sciences ended up costing more than three times its initial $400 million budget. But at the time, Mr. Calatrava could do no wrong.

In New York, his starting point was far higher than it had been in Valencia. The Federal Transit Administration pledged $1.9 billion for the project early on, and the Port Authority would throw in another few hundred million—a number that would climb much higher. (The feds, acting as enablers to the Port’s profligacy, ended up quietly throwing in another billion dollars to cover some of the cost overruns.)

But at this point, years before construction was to start, the project was, as one former Port Authority commissioner put it, “proposed to get an expansive federal grant at a point in time when nobody really knew what it would cost in its entirety.”

The feds were supposed to pay for nearly the whole thing, and the number was more of a placeholder. The fate of the site was still in jeopardy—Silverstein Properties (which had signed a lease for the site just months before the 2001 attacks) and the Port Authority were still fighting over who would build what, the tower designs hadn’t been finalized and security issues hadn’t been thought through. The Port Authority didn’t have a good grip on what the project would entail—a spokesman told The Observer that the initial estimates for the Hub were “unrealistic.”

Of the nearly $4 billion eventually budgeted for the Hub, a fair amount—the Port Authority has never clearly broken down the costs for the public, but the number likely has 10 digits—went toward common infrastructure that, in any other project without the emotions and political backing of the World Trade Center site, might not have passed the FTA’s muster.

There was $75 million, for example, that was spent to build a deck over the Hub to support the memorial. Another few hundred million are going to infrastructure costs on Greenwich Street with only a tenuous connection to the Hub.

The site, shared among various public and private entities and budgets, includes a lot of common infrastructure that appears to have been disproportionately billed to the Port Authority. The Hub is shouldering significant costs in rebuilding the site’s foundation, and it is also building a web of pedestrian passageways leading from the Hub to the private office towers on the site and across West Street to Brookfield Properties’ World Financial Center.

To win these concessions, Larry Silverstein took advantage of the Port Authority’s eagerness to show some progress on the site. He played hardball with the government from 2004 to 2006, a period of acrimonious negotiations between Silverstein Properties and the Port Authority over who would be responsible for what aspects of the site.

His lobbyists were the best of the best. He hired Global Strategy Group, whose clients have included Eliot Spitzer, David Paterson and Andrew Cuomo, to lobby for him, along with David Samson, who would go on to become the chairman of the Port Authority.

Given the choice between making Larry Silverstein pay his way and trying to get the site finished as quickly as possible, the Port chose the more expensive option. (Whether it worked is debatable—3 World Trade Center is a stump, and 2 World Trade Center is nonexistent; both are awaiting tenants to restart construction, with delivery now slated for 2015 and 2016.) The feds were throwing even more money at the Port Authority—nearly $2.9 billion—and it was the path of least resistance.

After responsibility for the site was ironed out, there was one last chance to bring the Transportation Hub’s cost back down to earth. George Pataki had promised the moon during his years in office, but Eliot Spitzer and his Port Authority chief, Anthony Shorris, wanted to keep the project within its budget.

Mr. Spitzer took a more business-minded approach to the Transportation Hub than Mr. Pataki. “The best way to explain the cost of downtown was the opportunity cost—what was not done because you had to do that?” said Mr. Spitzer in a telephone interview with The Observer. “Do you do Calatrava, or do you do the rebuild of Penn Station? That’s the way I forced us to think about it.”

His pick for executive director of the Port Authority was Anthony Shorris, who spent most of the ’80s as Ed Koch’s deputy budget director and finance commissioner and the early ’90s as the Port Authority’s first deputy executive director.

The public hadn’t yet been clued in, but costs were spiraling out of control. Working with Steven Plate, the director for World Trade Center construction at the Port, Mr. Shorris set to work on a plan that, he thought, would keep the project within its budget, which at the time topped out at around $2.5 billion, without the Port Authority having to contribute $1 billion of its own money. “I was determined not to severely diminish the Port Authority’s capacity because of the World Trade Center,” Mr. Shorris told The Observer.

Mr. Shorris wanted to strip the concourse and platforms of the most expensive Calatrava-designed elements and make use of more of the existing PATH infrastructure that had been serving commuters for a decade.

He told The New York Times in April of 2008 that he would put the full-fat project out to bid, but that “we want to make sure we have that alternative in place that does price out at $2.5 billion, so we know that we have an option to go to.”

But that was the last the public heard of Mr. Shorris’s ideas to keep the Transportation Hub within its budget. Eliot Spitzer resigned less than a month later, and Mr. Shorris resigned several days after that.

When David Paterson took office, he hired Christopher Ward to head the Port Authority. Where Mr. Shorris planned and consulted, Mr. Ward built. The Daily News, at the end of his tenure, called him a guy who “got things done,” but rapid progress came at a price.

Decisions under Mr. Paterson’s watch, said one former commissioner, “were really very heavily driven by the optics.” It was seven years after the attacks, and nothing on the site had even started to rise from the ground—an embarrassment to New York City. Mr. Paterson, who would not comment for this article, wanted tangible signs of success, said several sources close to the project, and he was less concerned than Mr. Spitzer about the financial hit to the Port Authority.

“Candidly,” said one former commissioner, Mr. Ward “was building it for you guys”—i.e., the press. New York’s media lambasted both the skyrocketing costs and cascading delays at the project, but it cheered Chris Ward for fast-tracking construction.

With the World Trade Center memorial sitting partly on top of the Transportation Hub, the logical order of construction was to finish the Hub first, and then worry about the at-grade memorial elements. Mr. Paterson’s command to Chris Ward to “get this fucking memorial open by 9/11”—the 10th anniversary of the attacks—meant the order of construction had to be reversed, with a deck built over the unfinished Hub to support the weight of the memorial.

Aside from his order to finish the memorial by the September 11, 2011, David Paterson was by most accounts not terribly concerned with how much it would all cost, or indeed with the World Trade Center site much at all. “We got lots of visits from Spitzer’s guys and Pataki’s guys,” said one former commissioner, “but I don’t believe we ever got any visit from Paterson’s.”

The hard costs of rushing the memorial were not significant in the context of a project measured in the billions of dollars—only $75 million, according to Port Authority documents—but the shift in focus from cutting costs to hurrying construction meant that Mr. Shorris’s value engineering of the below-grade elements, from which the majority of project costs would come, largely went out the window.

With the Port’s permission, Mr. Calatrava went all out in his design for the train station.

The Port Authority under David Paterson and Chris Ward did make some cuts to the design, including, notably, the now-infamous devolution of the light bird into a heavy stegosaurus. But the majority of Mr. Calatrava’s elaborate underground designs, throughout the web of passageways and retail space, were retained. The cost is now closing in on $4 billion, and Mr. Shorris’s more ambitious plan to keep it within its budget died a quiet death.

In the private sector, these things often turn out differently. Atlantic Yards in Brooklyn is one example. Despite Bruce Ratner’s “man crush” on Frank Gehry, in the words of one of his employees, and the nearly $100 million in fees that he paid for the design of the undulating apartment towers and stadium, Mr. Ratner didn’t hesitate to drop the starchitect from Atlantic Yards when the costs got too high—costs that were partly the result of Mr. Gehry’s insistence on designing the interior elements down to minute details like the stadium seats, something that should sound familiar to the Port Authority.

As an independent authority without access to the treasures of New York and New Jersey, the Port Authority is somewhat insulated from criticism and oversight. Its money comes from the cars that stream through its bridges and tunnels—the George Washington Bridge, with its $13 cash toll, is its biggest moneymaker, bringing in around half a billion a year. Its costs are hidden not only from the users of the World Trade Center buildings and Transportation Hub, but also from legislators in New York and New Jersey.

In its early years, the Port exerted its freedom from political pressure and acted independently of the governors. But decades later, it’s turned into something else entirely. Too juicy a target to remain autonomous, the Port Authority has devolved into a sort of slush fund for the governors of New York and New Jersey, its revenues out of reach of the states’ legislatures.

And then there’s the question of whether the Hub will have the intended uplifting effect on development in the Financial District. Office leasing is weak across the whole city, and there are huge vacancies in the towers that are going up (while half of them are not). Already chock full of architectural landmarks, the Financial District isn’t Valencia or Bilbao; it doesn’t need a monument to put it on the map.

Despite the staggering cost increases, some at the Port Authority—even those highly critical of the project’s cost—see it ultimately as a success. “At the end of the day,” said one former commissioner, “we didn’t fail—it got built.” (“It’s getting built” would be more accurate; the Hub is just now starting to rise above ground level and isn’t scheduled to open for at least another two years.)

These low expectations are a testament to the tremendous failings of the project—that the world’s most expensive train station, at nearly twice its initial budget despite design cutbacks, can be viewed in any light as a success.

Maybe, some years into the future (the Port Authority says two and a half), with tens of thousands of commuters from New Jersey pouring out from beneath the wings of Mr. Calatrava’s would-be concrete and glass bird, nobody will remember the cost.

But every time they can’t get a seat on a PATH train at 2 a.m., or get held up by delays in the 100-year-old North River Tunnels to Midtown, or emerge from a decrepit La Guardia Airport, they’ll have the Transportation Hub and other World Trade Center projects to thank.

Sydney Biddle Barrows. (Photo by Matthew Peyton/Getty Images)

The Mayflower Madam opened the door to her New York apartment. Inside, it was clearly more Mayflower than madam. Old family heirlooms include an inlaid mahogany secretary, two 18th-century family portraits of children and a Dresden clock.

The former debutante Sydney Biddle Barrows, a scion of Philadelphia’s aristocratic Biddle family, has called this rent-controlled, $1,800-a-month, three-room Upper West Side apartment home since before her 1984 arrest for running a pricey prostitution service. Her guest had come early, so she was still wearing shorts and her glasses. “You always expect that extra 20 minutes to get yourself together,” she said pleasantly. 

The settee on which the guest perched has sentimental meaning, too. “My girls used to sit on that sofa,” Ms. Barrows said nostalgically, as if having been in her former line of work were the most natural thing in the world. One cannot but marvel that Barrows still looks remarkably like she did when she burst on the scene at 32 as New York’s best-bred madam, appearing on the front pages of newspapers in handcuffs. When her Pilgrim lineage came to light, the tabloids had a field day. “It was very difficult when it first happened,” Ms. Barrows recalled. “I was used to people liking me, and all of a sudden there were people out there who didn’t even know me who disliked me.” The Social Register dropped her. Candice Bergen played her in a made-for-television movie.

An antique silver chest sits in the living room in front of a marble mantelpiece for a faux fireplace. “There is no other pattern like that,” she said of the custom-made silver flatware. It was created for her great-great-grandmother by Samuel Kirk, the famous 19th-century Philadelphia silversmith. “My mother didn’t want it,” she said. “How lucky is that?” Of a nearby grandfather clock she said, “Oh that,” waving dismissively, “I bought it myself.” Like any WASP worth her weight in single malt, Barrows sees buying one’s own furniture as tacky.

Since her headline-grabbing days, Ms. Barrows has reinvented herself as a marketing guru, a job quite in line with the talents she displayed in the early ’80s. Today, she is coaching businesses on how to attract clients and keep them coming back. Ms. Barrows’s clients span the U.S., Canada, Ireland and even Dubai.

“Dentists love me, for some reason. I don’t know why,” she said breezily. A Barrows dictum for dentists and gynecologists: paint clouds on your ceiling. “It gives people something to look at, creates an experience, and is different,” she said. On the side, she offers what she calls Roadblock Removal, a process for getting rid of the hidden emotions that hold us back. “I know it sounds like the 21st-century version of snake oil, but it really works,” exuded Ms. Barrows.

Sydney Barrows didn’t go into the escort business on a lark; she needed the money. Though her paternal grandparents had a huge house in the Philadelphia Main Line, her parents were divorced, and she grew up living with her financially strapped mother and maternal grandparents in Rumson, N.J.

“We ourselves had very little money,” she wrote in her 1986  autobiography Mayflower Madam, “but we did enjoy some of the trappings of old wealth.” Among them: magnificent parties at her grandparents’ estate, where she would help pass trays of hors d’oeuvres in a little apron made for her by the maid. During her senior year at Stoneleigh-Burnham, a Massachusetts boarding school, Ms. Barrows was expelled for sneaking off campus to attend a winter college weekend with a boyfriend. It was the last straw in a series of minor infractions.

When it was time for college, Ms. Barrows’s father informed her that her trust fund had been spent on boarding school. So Ms. Barrows put herself through the Fashion Institute of Technology, graduating first among the fashion buying and merchandising majors, then landed a job at the old Abraham & Straus department store, going from lingerie trainee to buyer.

According to Ms. Barrows’s autobiography, she was fired from her next job at a New York-based buyer for smaller stores throughout the country for refusing to participate in a kickback scheme. When her friend “Lucy” confided that she was answering the phones at an escort service in Midtown Manhattan, Ms. Barrows says she reluctantly signed on. It wasn’t long before her inner merchandiser told her she could do a better job than her boss. She was appalled by his exploitative treatment of the women who worked for him as well as his “terrible taste in clothes.”

“I started to channel my annoyance into a kind of competitive game: what would I do in this situation?” she wrote in her autobiography. The “fantasy” of owning her own escort service became “increasingly powerful” as Ms. Barrows realized just how much money her boss, for all his numerous faults, was making.

She and her friend Lucy decided to open up shop, and Ms. Barrows set about hiring the right women. She asked prospective employees to come for an interview “dressed as if your grandfather was taking you to lunch at ‘21.’” She regularly improved the taste of her “young ladies” through trips to Saks and Macy’s. She named her service Cachet, cleverly chosen to weed out men who couldn’t pronounce it.

As detailed in Mayflower Madam, Ms. Barrows’s employees were told to read Time and Newsweek and watch 60 Minutes. They were forbidden to drink hard liquor—only wine, champagne or a kir royale. The dress code: elegant outer garments and risqué underwear. Ms. Barrows graphically instructed her young ladies on the ins and outs of oral sex, but in the primmest of tones. Cachet prospered, and Ms. Barrows—or Sheila Devin, as she called herself—eventually added a slightly more expensive option that she called Finesse.

“I was competing with everybody in town,” Ms. Barrows recalled, “and everybody else was less expensive. And you have to remember something—this was the ’80s. It was before AIDS. So not only did all of my competition have lower prices, I was also competing with free. And yet I got people to pay top dollar. How did that happen? Because they were paying for the entire experience—from the second they dialed our number until we called them after she left and asked them how everything was. They were paying for the entire experience, and no one else thought of it that way.”

“Sydney ran a kick-ass agency,” said Village Voice columnist Michael Musto. “She hired the finest women, after very tough audition sessions, and she demanded the very best of them.”

To attract clients, Ms. Barrows relied on subtle advertisements such as one in the International Herald Tribune that whispered, “We’re not for everyone.” Cachet was entering its fifth year when the police broke down the door with a sledgehammer and Ms. Barrows was arrested. She pleaded guilty to the misdemeanor of promoting prostitution, avoiding a trial. Ms. Barrows still gleefully attributes the leniency to the brilliance of her lawyers, who maintained that it would be absolutely necessary to read out the names of all the johns during the jury selection, supposedly to ensure impartiality. She celebrated the end of her legal difficulties with a champagne press conference at an elegant restaurant called Wood’s.

In the years following her scandal, Ms. Barrows found herself trapped in a peculiar brand of fame. She was on the town in a cocktail dress nightly, but had nowhere to go during the day; she was virtually unemployable. Ms. Barrows got by by giving lectures and writing books. Mayflower Madam: The Secret Life of Sydney Biddle Barrows was hailed by Fortune magazine as one of the top business books of the year, though its author was just eking out a living.

All this began to change, however, in 2006 when she met Dan Kennedy, an irreverent marketing guru and author. Mr. Kennedy puts on conferences and provides a “resource center” for entrepreneurs called GKIC (Glazer-Kennedy Insider’s Circle). Mostly out of curiosity, Mr. Kennedy decided to take in a lecture entitled “How to Market a High-Priced Service” by the former madam at a Chicago conference. “She was brilliant,” Mr. Kennedy said.

Mr. Kennedy took her under his wing and helped her shape her consulting business. He gave her a marketing tip: don’t run from your Mayflower Madam past. In the age of Google, it’s impossible to hide. And besides—legal or not—Ms. Barrows was one heck of a merchandiser when she was a madam, with newspapers reporting that she was raking in $1 million a year. “Sydney is the most intuitive person I’ve worked with under the umbrella of marketing in 35 years,” said Mr. Kennedy. She calls him “my fairy godfather.”

Ms. Barrows still believes that a little panache can make any business stand out. When, for example, a compounding pharmacist enlisted her services, she was dismayed that the company didn’t capitalize on being a third-generation business. She ordered them to find some old equipment and display it.

“One of the biggest mistakes day spas or cosmetic surgeons make is that, first you go and see the person who is going to be doing the service—and that office is generally pretty nice—and then you get sent on to patient coordination, where you are going to talk about money, and all hell breaks loose. I mean, you’re looking at a desk with metal legs and faux wood, and there are all these filing cabinets, which might not necessarily be in the best condition,” Ms. Barrows said. “And if you are a plastic surgeon and you want to charge somebody $30,000 for a face-lift, you’d best not be seen with a Bic pen.”

With Mr. Kennedy, Ms. Barrows wrote a 2009 book titled Uncensored Sales Strategies: A Radical New Approach to Selling Your Customers What They Really Want — No Matter What Business You’re In. The premise is that the Mayflower Madam’s marketing strategies work anywhere. It’s certainly working for her—some months, she said, she even surpasses what she made “back in the day.”

For example, Ms. Barrows recommends well-chosen gifts to build loyalty, just as the Mayflower Madam sent a chilled bottle of Dom Perignon to clients at Christmas, “subtly reinforcing in his mind that we were a prestige business.” In the same way that she would phone a john to check in after the girl left, Ms. Barrows says that it’s important to keep in touch with clients. “I create a certain environment for consumers,” she said. “I am the Martha Stewart of client experience.”

If the Mayflower Madam scandal seems tame now, it is probably not so much that the world is bored with high-priced prostitution (ask Eliot Spitzer) but that WASPs are in eclipse. They simply can’t compete with the antics of the Kardashians or the cast of Celebrity Rehab.

Ms. Barrows is nevertheless proud to be descended from Elder William Brewster and John Howland, a Pilgrim who fell over the side of the Mayflower, was fished out and lived to tell the tale. It seems that, nearly 30 years after her arrest, the Mayflower Madam too has landed on her feet.

editorial@observer.com

Illustration: Mark Hammermeister

“I guess I’m not as cynical as you are,” Neil Barofsky, former watchdog for the Treasury’s Troubled Asset Relief Program and presently the busiest cynic caught up in the government’s entanglement with the banking business, told The Observer.

In a time when everyone seems to be cheating—and most everyone getting away with it—we’d put it to Mr. Barofsky that there doesn’t seem to be much percentage in honest behavior. If Wall Street executives, tween idols and journalistic heavyweights are shirking the rules to get ahead, doesn’t it make sense for the commoners to do the same?

It was the third week in July, and Mr. Barofsky was promoting the publication of Bailout, his insider account of Washington’s response to the financial crisis. Three days prior, the Federal Reserve Bank of New York had revealed that in April 2008, a Barclays employee called the regulator and explained that the bank was fudging its Libor submissions. “You’d think someone would pick up the phone to the Department of Justice and say, ‘We believe there’s a global conspiracy to fix interest rates,’” Mr. Barofsky said. “Clearly no one did that.”

Of course, the Fed’s admission wasn’t a total surprise. In June, Barclays had paid some $450 million to settle charges that it had rigged Libor submissions for the short-term gains of proprietary traders, and at the behest of senior executives to halt a flagging share price.

News that the world’s most powerful regulator stood by as one of the world’s most powerful banks broke the law landed like a punch in the stomach. It wasn’t just Barclays. All summer long, the headlines bled with tales of financial perfidy. At least 10 other banks were under investigation for rigging interbank lending rates, and several had fired employees amid investigations. The founder of an Iowa-based futures broker had “lost track of” $200 million in client funds over the course of 20 years. HSBC had spent the better part of a decade banking to terrorists, drug kingpins and sanctioned nations such as Iran and Cuba.

It wasn’t just banking, either. Seventy Stuyvesant High School students caught text-messaging test answers to each other were allowed to retake the test. Journalistic wunderkind Jonah Lehrer had to be caught cheating twice before he lost his gig at The New Yorker.

The Olympics hadn’t even started yet, and everywhere we looked, people and institutions were breaking the rules and getting away with it. At some point, an honest man might get stuck on the notion that there wasn’t any point to good behavior. If everyone else is cheating, don’t people owe it to themselves, and their shareholders, to do the same? Is it possible that playing by the rules means doing a substandard job?

“It’s never that hopeless,” Mr. Barofsky argued. But we weren’t so sure.

“THE UNETHICAL TENDENCY is a human universal,” said Paul Piff, a post-doctoral scholar at the University of California, Berkeley. But not everyone bends and breaks the rules equally.

Mr. Piff’s research shows that the rich are more likely to cut off other drivers, or cheat in games of chance, and subjects who identified greed as a positive value were more likely to cheat. But greed isn’t the only factor. Creative people are more likely to cheat, he told us, as are the highly educated.

Unethical behavior seems to be driven by rank—the more status you have, the less dependent you’re likely to be on social relationships—and self-focus. Meanwhile, watching other people cheat changes our understanding of what’s socially acceptable. Successful people are more likely to cheat, increasing the chances that they’ll become still more successful. And, we suppose, increasing the chances that they’ll be surrounded by successful people who are more likely to cheat themselves.

“It’s something called social proof, and it’s one of the strongest forces in society,” said Dan Ariely, a behavioral economist at Duke University and the author of The (Honest) Truth About Dishonesty, a book-length work on the motivations for cheating.

Which might explain why it’s so rare to find a lone lawbreaker. If one Libor submitter was rigging rates for traders, it’s only natural that the others would feel entitled to a little bit of Bollinger. If UBS was dabbling in rigging bids on municipal bond investment contracts, as federal prosecutors allege, it’s not hard to imagine (as prosecutors also allege) JPMorgan or Bank of America or GE Capital dipping their toe in the same pool.

Or as Noel Biderman, founder of Ashley Madison, which describes itself as “the most successful website for finding an affair and cheating partners,” told The Observer, “When Kristen Stewart behaves this way, I think it gives greater license to regular people.”

Oh, Kristen. When we heard she was giving up a leading role in the romantic drama Cali after her affair with director Rupert Sanders was exposed by paparazzi, we thought Ms. Stewart was the last soul in Hollywood with the capacity for shame. Then we heard rumblings Ms. Stewart’s ex Robert Pattinson has had several affairs himself. Was she really contrite, or simply laying in wait for the shoe to drop on her former beau? And in that case, was she moving on from cheating in love to cheating in public relations?

Perhaps not quite, but it called to mind Philip Hindes, the British cyclist who told reporters that he crashed intentionally in the team sprint event, to take advantage of a rule that allowed his team to restart the race. It may have been poor sportsmanship, but Mr. Hindes’ intentional crash fell within the rules, and the Brits eventually claimed Olympic gold. It’s not hard to argue that the cyclist had a duty to teammates and nation to take the dive—even if a widespread adoption of Hindesian behavior would ruin the sport for everybody.

The four women’s badminton teams that tanked their way through preliminary matches in hopes of gaining a clearer path to the podium were less successful in their attempt to skirt the spirit of the competition. But Algerian distance runner Taoufik Makhloufi managed a bit of rule-skirting that the British cyclist might applaud: He was disqualified for the London Games for walking off the track in the middle of an 800 meters heat, in a suspected ploy to conserve energy for another event. Two days later, Mr. Makhloufi was a gold medalist in the 1500 meters.

“What we’ve seen is clear gray areas and big rewards,” David Callahan, co-founder of the think tank Demos and the author of The Cheating Culture: Why More Americans Are Doing Wrong to Get Ahead, told The Observer. A few hundredths of a second can be the difference between first and second, but “there’s an enormous difference between gold and silver when it comes to endorsements,” Mr. Callahan said.

What’s true in sports is true in school or finance. In a study published by the whistleblower practice at law firm Labaton Sucharow last month, 30 percent of 500 financial services pros surveyed said that bonus considerations increased the pressure to behave unethically. The Stuyvesant High School students who had to take a state Regents exam a second time after they were implicated in a scheme to share answers by text message were competing for places at the nation’s top colleges.

“Some people feel that if they don’t cheat they put themselves at a competitive disadvantage.” Danny Solomon, who graduated from Stuyvesant this year, said in an email. “For some, integrity be damned, drastic action is justified.”

CHEATING, OF COURSE, IS NOT all upside. Fareed Zakaria, for instance, was caught borrowing heavily from a New Yorker story on gun control, and was suspended from Time and CNN.

“The first thing is, if we are getting caught, this is bad for us,” said Mr. Ariely. “The second is that we are creating a tremendous downside for society, and this can come back to haunt us. Think about living in a world where you can’t trust anybody.”

“If other people are cheating, it may serve me well to do the same,” said Mr. Piff. “That may be in the short term.” However, he was quick to add, “When groups start to upset the status quo by violating the norms, people become more and more alienated, cooperation decreases and the group disintegrates.”

To Eliot Spitzer, it’s a matter of making the penalties uncomfortable enough to prevent further lapses.

“What I struggle with now is that we have no effective remedies,” he told us. “You want to do something big and dramatic, but the draconian penalty is rarely seen as appropriate.”

In the absence of political will to take harsh actions against institutions or senior executives, he said, a broken-windows approach might work, policing the small-time infractions in hopes of beginning a systemic change. “Maybe it’s the guy on the trading floor who puts in an order for his favorite client because the guy took him to a Yankees game last night. Maybe it starts there.”

Jordan Thomas, head of Labaton Sucharow’s whistleblower practice, thought new whistleblower rules could help. “If people aren’t fearful, they stop thinking with their ethical self,” Mr. Thomas said. “Those people have more to fear, because of the whistleblowers and whistleblower lawsuits that are likely to come.”

“It’s never that hopeless,” Mr. Barofsky told us. “The people can speak up and compel politicians to break up the banks and break up the regulatory structure. “It may not happen until the next financial crisis hits,” he added. “By the way, I think the next one will be more devastating, because of some of the things we did the first time around.”

For his part, Mr. Barofsky has eschewed cheating. In the first chapter of Bailout, Mr. Barofsky goes to drinks with Herb Allison, a former chief operating officer of Merrill Lynch, at the time an advisor to the U.S. Treasury. The story goes that Mr. Allison warned Mr. Barofsky that trash-talking the administration over TARP was a sure way to ruin a career. It didn’t have to be that way: “Well, is it an appointment you might be looking for?” Mr. Barofsky says Mr. Allison asked. “Something else in government? A judgeship?”

Mr. Barofsky didn’t bite, and has settled for the less prestigious career path of law professor and book author. Not long ago, we noticed that Jonah Lehrer’s Imagine had popped up as No. 13 on the The New York Times bestseller list for the week of Aug. 12, though the work had been discredited. That burned, but there was a solace: Bailout was No. 9. So maybe there is hope for the honest man.

Then again, regulators announced last week that they were ending investigations into whether Goldman Sachs misled investors in a $1.3 billion mortgage deal without filing charges. Maybe Mr. Barofsky should have taken that judgeship.

pclark@observer.com

According to the Times, Current management "unanimously" agreed that Mr. Olbermann had failed to honor the terms of his five-year, $50 million contract, giving them the right to give him the boot. After declining to speak to the Times, Mr. Olbermann slammed network executives Mr. Gore and Joel Hyatt on Twitter, saying they had fired him unethically and he would seek legal recourse.

"Current was also founded on the values of respect, openness, collegiality, and loyalty to our viewers," the network wrote in a letter to viewers. "Unfortunately these values are no longer reflected in our relationship with Keith Olbermann and we have ended it."

"I'd like to apologize to my viewers and staff for the failure of Current TV," Mr. Olbermann tweeted Friday afternoon. He went on, 140 characters at a time:

"But for more than a year I have been imploring @AlGore and @JoelHyatt to resolve our issues internally, while I've been not publicizing my complaints, and keeping the show alive for the sake of its loyal viewers and even more loyal staff. Nevertheless, Mr. Gore and Mr. Hyatt, instead of abiding by their promises and obligations and investing in a quality news program, finally thought it was more economical to try to get out of my contract. It goes almost without saying that the claims against me  in Current's statement are untrue and will be proved so in the legal actions I will be filing against them presently.  To understand Mr. Hyatt’s “values of respect, openness, collegiality and loyalty,” I encourage you to read of a previous occasion Mr. Hyatt found himself in court for having unjustly fired an employee. That employee’s name was Clarence B. Cain: http://nyti.ms/HueZsa. In due course, the truth of the ethics of Mr. Gore and Mr. Hyatt will come out. For now, it is important only to again acknowledge that joining them was a sincere and well-intentioned gesture on my part, but in retrospect a foolish one. That lack of judgment is mine and mine alone, and I apologize again for it."

Mr. Olbermann's exit has been rumored since January, when, due to his dissatisfaction with Current's technical capabilities, he "declined" to cover the Iowa caucuses. Mr. Olbermann left Countdown's previous home, MSNBC, abruptly in January of 2011, after clashing with network executives. With any luck, this pattern of interpersonal problems will be further elucidated by The Newsroom, Aaron Sorkin's new HBO project based on Mr. Olbermann.

Mr. Spitzer's first foray into TV, CNN's Parker Spitzer, was also plagued by infighting until the network dropped co-host Kathleen Parker. Parker Spitzer's one-man iteration, In the Arena, was canceled in a line-up shuffle last summer.

Update (6:44 pm): A source with knowledge of the situation told us Mr. Spitzer began talking with Current last November as tensions mounted between Mr. Olbermann and the channel's owners. Mr. Olbermann was reportedly angry about the channel's low production values compared to his former home, MSNBC. Despite these tensions, our source said no deal was made to bring Mr. Spitzer to the network because Mr. Gore, was desperate to keep him.

"Gore just tried to kiss Keith's ass," our source said. "It was like the geek trying to impress the cool kid in high school."

Mr. Gore's attempts to placate Mr. Olbermann were clearly unsuccessful.

Toby Harnden writes for The Daily Mail, in a just-published report:

Last weekend, Breitbart told friends he was in early talks with CNN about a Crossfire-style show in which he would argue from the Right alongside former US House representative Anthony Weiner taking him on from the Left.

Breitbart was, of course, responsible for breaking open the scandal that took Rep. Weiner down. He appeared at the press conference to hijack it (one Observer reporter noted at the time: "This is like when The Joker takes over Gotham").

A spokeswoman for CNN told Harnden that the network had no comment. So: Not a denial. UPDATE: Dylan Byers at Politico gets the denial from CNN that Harnden couldn't (or didn't):

"It's totallly false," CNN's Edie Emery said. "CNN was not in discussions."

For context, networks have talks all the time about potential projects, and CNN—which hasn't exactly performed well as a network over the last few years compared to its cable news rivals—probably talked about quite a few possibilities, some of them as extreme (and insane) as this.

Then again, they did put a once-scandalized New York governor on their network, and one of his first guests turned out to be Henry Blodget, someone Spitzer had taken down during his time as New York's A.G. Another guest on Spitzer's first show?

Andrew Breitbart, of course.

Also, West Wing creator Aaron Sorkin, who—in an incredibly bizarre coincidence—Toby Harnden also spoke to about Breitbart:

Sorkin told me via email: "I e-mailed Andrew last Friday because the episode of The Newsroom I'm currently writing takes place during the week the Anthony Weiner photos were in the news.

"Andrew and I had struck up a friendly e-mail relationship and so I reached out to ask him if he could give me a timeline of the events from his point of view. I got a quick response -'I'm in' - and we were supposed to meet for coffee at the end of the day today [Thursday]."

Sorkin said that the coffee would have been "about Andrew shedding any new light on the Anthony Weiner incident" and "we'll likely see shards of Andrew during his various appearances that week" in news footage from that time.

The entire thing is odd, and—if true—demonstrates at least two of the three entities in question's potential desperation to get back into the spotlight.

Which is to say: Andrew Breitbart's involvement in the potential for this show is undoubtedly the most unsurprising element of it.

CNN: Breitbart-Weiner show 'totally false' [Dylan Byers/Politico]
Andrew Breitbart was 'in talks with CNN' over new show with Anthony Weiner [Daily Mail]

fkamer@observer.com | @weareyourfek

The lawsuit accuses Mr. Spitzer of knowingly acting with "actual malice" against former Marsh & McLennan executive William Gilman by writing a column for Slate entitled 'They Still Don't Get It.' The column, published one year ago, today, doesn't mention Mr. Gilman by name.

When Eliot Spitzer was New York's Attorney General, he opened an investigation into Marsh, which resulted in eight indictments, an $850M settlement from Marsh to the State of New York, and 21 guilty pleas for various offenses stemming from the investigation. Mr. Gilman, a former marketing director for Marsh, was found guilty of a felony antitrust charge in 2008; in July 2010, his conviction was overturned due to new evidence in the case.

Mr. Spitzer penned the column for Slate on August 22, 2010. In it, he took on the Wall Street Journal's opinion section over a column they wrote entitled "Eliot Spitzer's Last Admirer," regarding then-Attorney General and soon-to-be-governor Andrew Cuomo's defense of Mr. Spitzer's prosecutorial legacy. From the column, the accused offending passage:

The Journal's editorial also seeks to disparage the cases my office brought against Marsh & McLennan for a range of financial and business crimes. The editorial notes that two of the cases against employees of the company were dismissed after the defendants had been convicted. The judge found that certain evidence that should have been turned over to the defense was not. (The cases were tried after my tenure as attorney general.) Unfortunately for the credibility of the Journal, the editorial fails to note the many employees of Marsh who have been convicted and sentenced to jail terms, or that Marsh's behavior was a blatant abuse of law and market power: price-fixing, bid-rigging, and kickbacks all designed to harm their customers and the market while Marsh and its employees pocketed the increased fees and kickbacks.

Via an Associated Press report, this is where Mr. Gilman takes umbrage:

In his complaint, Gilman said Spitzer defamed him in writing, stating that "Marsh's behavior was a blatant abuse of law and market power: price-fixing, bid-rigging and kickbacks all designed to harm their customers and the market while Marsh and its employees pocketed the increased fees and kickbacks."

Gilman also said Spitzer defamed him in writing by stating that "many employees of Marsh" have been "convicted and sentenced to jail terms," when none had.

Mr. Spitzer has declined to comment on the case to Bloomberg and the Associated Press. Slate and The Washington Post Company—which owns Slate—are also named as defendants in the suit.

Last summer, then-Observer media reporter John Koblin wrote about the ongoing issues plaguing the pursuit of libel lawsuits, which are dwindling in numbers. The standard for libel lawsuits—New York Times Co. v. Sullivan (1964)—created the contemporary standard for what remains the general litmus test of libel to this day: a standard of "actual malice," wherein something is published with "reckless disregard" for the truth. A high burden is placed on plaintiffs to prove this, which prevents everyone from suing everyone over anything published anywhere at any point in time. From last year's Observer piece, 'The End of Libel?':

In the most recent study, the Media Law Resource Center found that libel trials in the 2000s were down more than 50 percent from the 1980s. In the 1980s, the center found 266 trials; in the ’90s, that number dropped to 192; in the past decade it dropped to 124. In 2009, only nine surfaced.

fkamer@observer.com | @weareyourfek

NYO: You've emphatically noted in the past intentional deception as what distinguishes being wrong from lying or from fraud. Much of the outrage directed at S&P when they downgraded American debt was: they failed to downgrade the CDOs and other toxic assets that assisted the 2008 crash, their credibility is shot, ergo, how dare they downgrade our debt. It’s pretty clear that—among the other reasons—they failed to downgrade these products because they’re paid to rate them by the people creating them. From a prosecutorial standpoint, is there an inherent deception in the system?

ELIOT SPITZER: Deception's a strong word to use without actual proof of intent to deceive. When you look back at all the cases [the New York Attorney General's office] made, we actually had that proof. There were actual deceptive acts taken. I just want that as a backdrop.

NYO: But again, we’re talking about deception on a systemic scale.

ES: Right. There’s a structural flaw and has been forever in the way [ratings agencies] have been paid that’s led to a failure of hard analysis underlying many of their ratings. There should have been prosecutions in the past, there should’ve been a deeper analysis of those conflicts and the tensions that led to very poor analysis.

NYO: How would they’ve been prosecuted, though? It doesn’t seem like there’s an existing statute...

ES: Sure there is, the same way we brought the ratings case against the analysts. All you need is a common law fraud concept that people—and you go back to the emails, just as we did in the analyst case—and again, I’m not saying “let’s relive the past” This is a more theoretical matter. Go through the emails, and you would’ve seen—“this isn’t a triple-A, but they’re a good client, and we’re gonna...”—that tension between what ratings were put on a product, and one’s belief or recognition that they may not deserve it. There are many theories about what would be there, but you have to get the evidence, to state the obvious. I don’t want to say "gee, they should’ve been prosecuted.” But there should’ve been greater scrutiny over the years, and the structure has always been problematic. It was next on our hit parade, if I had been there for that.

NYO: Is there any way to effectively reform this system?

ES: The best answer—and I think the marketplace is moving to this—is to essentially tell the ratings agencies: “You’ve got to earn your credibility.” Let’s remove from them the position they had for many years, which was the government saying “You are designated as agencies to which we ascribe a certain elevated position. And you have been given this power by the government without having earned it.“ There’s no reason for that. And now I’m going to sound like a freemarketeer.

NYO: Haven’t they earned it, though? There are only ten ratings agencies certified by the government.

ES: They haven’t earned it based upon their performance.

NYO: ...On the merit of their ratings.

ES: Right. In other words, when I say “earn it,” I mean “earn it” in terms of establishing to the marketplace that your ratings actually mean something.

NYO: Somehow, this hasn’t already happened.

ES: No. [There’s a] notion that there are no straight lines in the world, and what most people do—and understandably—is presume that lines continue in perpetuity. Rating agencies have been uniquely bad at spotting inflexion points, and that is, of course, what you’re paying them to do.

NYO: Not just that, but they’re being paid to be bad.

ES: Anybody can extend the line in the direction in which it has been moving. The hard part is saying “Wait a minute. There’s too much securitized mortgage debt out there, and therefore there’s a problem.” Quality control is lagging, and that’s what we’ve picked up by actually digging into the underlying mortgages.

NYO: That...is what the short-sellers picked up.

ES: That’s what the short-sellers picked up. That’s the sort of analysis the rating agencies should have done, if in fact they had been worth their mettle.

NYO: It’s not exactly a trenchant observation, but isn’t the inherent problem facing rating agencies as they stand that if one takes their bad products to a ratings agency, and they don’t rate it triple-A, you can just take it to the next guy? The free market!

ES: It’s why the rating agencies need to make a determination: either they will maintain their integrity, and they will be paid because people will value them in the marketplace, or you need to come up with a different payment mechanism. I’m not saying any of this is easy. “Who’s going to pay for honest research?” becomes a very difficult question.

NYO: Doesn’t honest research benefit these companies in the long-term?

ES: I’d think so. You need a payment mechanism to those who are going to do the real analysis that will not taint it or, if it’s tainted, let the marketplace know it.

NYO: What do you mean by ‘payment mechanism’? For the government to pay them?

ES: Well, look: I never wanted that. Remember, way, way back, we tried to come up with all the different permutations that were out there. We wanted to have independent research. And who’s gonna pay for it? There was a notion—and this caused a hullabaloo when it was floated; it wasn’t even my idea, but conceptually there’s nothing wrong with it—that the stock exchange would have research. The stock exchange as a not-for-profit would say: “Look, you guys go out there and do research” sort of as an academic exercise. But the question is, in this day and age, how can you derive a revenue stream from research whether you’re an analyst in the tech sector of a Morgan Stanley or you’re Fitch doing bond analysis. Because the information? Once it’s out there you can’t protect it very well. And if you put a negative rating, who’s going to pay for it? These are real problems. But what we do know is that as a consequence of this, the bond ratings—much like the analysts that we pursued—were uniformly and excessively positive.

NYO: The consequences of these excessively positive ratings have greater implications on the world beyond the private sector. You’ve said that “only government can take the steps necessary to overcome market failures.”

ES: Well, one type of intervention might just be: Take away all the government imprimatur that the rating agencies have and say ‘These guys are no better than what you have made of them in the past. They really haven’t spotted anything important. And you’ve got to do your own work.”

NYO: What was your reaction when you saw the S&P downgrade of American debt?

ES:  I thought it was...interesting. It wasn’t an economic analysis.

NYO: It was a political analysis.

ES: It was a political analysis. The one thing we’ve thought there might be some modicum of skills retained by these companies was economic analysis. We haven’t ever viewed them as being political barometers. So now, in a way, they’re putting on an entirely different hat saying as a political matter, they’re downgrading our debt.

NYO: Are they out of their depth?

ES: I don’t think they are. But I don’t think they have any unique skills either. They’re smart people, and I think they reached the same conclusion that many folks have reached: our government has been somewhat—or greatly—dysfunctional dealing with macroeconomic issues, and that we’re kicking the can down the road both in terms of the deficit and in terms of what I view as the more important issue, job creation. But we don’t need S&P to tell us that. In other words: this wasn’t a very sophisticated analysis of debt exposure, where they picked up something we hadn’t seen about some pension obligation, and said “A-ha! Now we see where you’re hiding it. Hence: we’re downgrading you.”

NYO: What’s interesting about it, though, is that they actually did go out on a limb and distinguish themselves from the other agencies. And it feels like they’re being punished for it.

ES: They were not wrong in their political analysis. They’re wrong in their economic analysis. The risk of a default, having watched this exercise, is actually lower than it was in the past. In a sense, you could say that even with the Tea Party there, at the end of the day everybody said “We will not tolerate a default.” We know that. At that point I don’t think the downgrade makes sense, when you look at where we now stand in comparison to other government and private sector entities. Having said that, there was some criticism that this was sort of a finger back in the eye of government saying “Okay, you want to give us a tough time for missing the sub-prime debt? We’ll show you we still have some cards to play.” You know, look: I don’t want to challenge motive. Frankly, the market, to a great extent, has ignored their downgrade.

NYO: Funny how that nebulous “market” will take the ratings agencies’ stamps of approval when it wants them, but ignore them otherwise. Are they just totally useless right now?

ES: The rating agencies have provided a legal and emotional backstop for entities that have to make certain decisions and need to rely upon something. It’s somewhat akin to opinion letters in a takeover context. You need something that gives you the legal foundation to act. So if you’re a board of directors or an investment committee you can say “here’s our portfolio, and we’ve done our due diligence. Here are the rating agency’s statements.” You don’t really think that they’re worth that much. On the other hand, you also know that you don’t have the internal capacity to analyse the bonds out of some tiny sewer department that’s issuing the debt in the tiny county in some state out in the Midwest. To that extent, they provide some sort of baseline utility.

NYO: Allow us a moment of total, wide-eyed naivety: As someone who’s navigated the ridiculous thoroughfare of government bureaucracy, what are the odds that any legislator anywhere would take significant action on the systemic issue of ratings agencies?

ES: Probably slim.

NYO: Why? Because it seems like something that...

ES: Should have been done a long time ago? Or any prosecutor for that matter. I mean, there hasn’t been any meaningful effort to take a hard look at it.

NYO: It seems like now more than ever, this could be a win-win situation for somebody both in terms of political capital, and in terms of the climate required for one to actually succeed in that situation. And yet—again, this is knowingly naive—but nobody’s going through with it.

ES: It’s hard to finally close that loop. The institutional presence of the rating agencies—not to be excessively cynical...

NYO: It seems excessive cynicism is the realistic approach, here.

ES: Well, the status quo has its own momentum. Think how many localities and entities have received rating agencies work that have permitted them to access the markets. They receive the triple-A. They show up on Capitol Hill saying “Don’t take away this stamp of approval. We would never be able to get the teachers pension fund from Alabama to buy us, if we didn’t have this stamp of approval. So we need it.”

NYO: Enter lobbying dollars.

ES: Yeah, yeah. But it’s a shame. ‘Cause I think the reliance on the rating agencies was—as we all now know—one of the critical errors that permitted the bubble to inflate.

NYO: After the bubble inflated and popped, and after S&P recieves scrutiny over their sovereign debt rating, do you think, moving forward, that the mistakes made in the past could be repeated again with the ratings agencies?

ES: The mistakes inevitably will be repeated again.

NYO: Taking a different form.

ES: In a slightly different form. And it’s just a question of how long until it happens again.

NYO: Like Mark Twain says: “The past doesn’t repeat itself but...

ES: ...it rhymes.” The best little book on this ever was Galbraith’s A Short History of Financial Euphoria. Galbraith gets it right. We keep doing it historically ‘cause debt and leverage are so addictive. As a narcotic, they get into our blood stream. We can’t get rid of them. So we’ve learned the lesson. The metaphor I used to use is that it’s like getting a speeding ticket. You learn the lesson for some period of time but then 20 miles down the road, 30 miles down the road, your foot starts going back down on the accelerator. It’s a question of for how long we’ve learned the lesson.

NYO: Is this something just inherent in human nature that can’t be controlled? On one hand, controlling it would really be sticking a deep hand in the free market, but on the other hand, if you leave it unattended to do this again, the only people we have to blame are ourselves.

ES: Which I think we know. The regulatory structure worked pretty well from the Depression until the mid-’80s, when we did have a slightly more aggressive approach to regulating leverage in those sectors that could cause enormous harm. Not without problems here and there. The answer is when we have some brake that can be applied to leverage and risk in that regard, we can do okay. When we take our foot off that brake, inevitably the bubbles re-emerge.

NYO: It seems like the foot’s coming off the break again. It’s only been two years.

ES: Well, let’s see what happens. It’s what makes life interesting, right? It’s what keeps a journalist in business. It’s what keeps prosecutors in business. 'Makes it more fun.

Eliot Spitzer (Patrick McMullan)

The Post recently asked Eliot Spitzer if he were planning a run for office, and he replied in part: "'Those who know don't say, and those who say don't know.' So I wouldn't rely on anything anybody has told you." Perhaps the reason the line is in single quotes is because it's taken from the Tao Te Ching. Has Mr. Spitzer been studying Eastern religions? Those who know don't say!

(The line is also featured in the rapper Akbar's song "Those who say," which further includes the lyric "Remember when I stomped ya like in concert? / With the rugged raw I came, I saw and I conquered," but it's unlikely that Mr. Spitzer has been listening to this on vacation at tennis camp in Vermont.)

ddaddario@observer.com :: @DPD_

Journalists from newsrooms, magazine offices and studios across the country digested the information, repackaged it appropriately for their readers and viewers and moved on to the next order of business. For a select few, that meant planning for the weekend's events, the most high profile of which was the annual White House Correspondents Dinner--a tradition begun in 1920 that brings together the press and the people they purportedly cover for an evening of entertainment, shmoozing and, as the name implies, dinner. It is the nexus of a series of events, mostly cocktail parties and a few selective brunches, that extend throughout the weekend and are hosted by various media organizations and attended by Washington insiders, journalists--and increasingly, California-based attendees with a presumed interest in public policy, like Kim Kardashian and the Jonas Brothers--some of whom are invited as guests to the dinner by media organizations represented there.

At 4:52 p.m. on Thursday afternoon,  The Observer emailed The New York Times' executive editor, Bill Keller, to ask whether the dinner--an affair wherein journalists who are tasked with covering beltway power spend an evening socializing with it--is at worst, an outright conflict of interest, and at best, well ... a bit unseemly. Former New York Times columnist Frank Rich, who recently left the paper to become a columnist for New York magazine, had criticized the paper's attendance at the event and was said to be influential in curtailing its official appearances a few years prior. (Mr. Rich, who was out of the country, did not respond to The Observer's requests for comment.) The Observer wondered whether Mr. Rich's departure changed the paper's thinking on the issue. "GROAN," Mr. Keller responded via e-mail. "SUCH a done subject. Why don't you try Dean Baquet in the Washington Bureau? I'm sure he'd LOVE to answer your questions."

Seven minutes later,  The Observer received an e-mail from Washington bureau chief Dean Baquet. "Here is the deal," Mr. Banquet wrote. "We are not being holier than thou, or criticizing anyone who chooses to go. But we came to the conclusion that it had evolved into a very odd, celebrity-driven event that made it look like the press and government all shuck their adversarial roles for one night of the year, sing together (literally, by the way) and have a grand old time cracking jokes. It just feels like it sends the wrong signal to our readers and viewers, like we are all in it together and it is all a game. It feels uncomfortable."

An hour earlier, in the Situation Room of the White House, senior intelligence advisers explained to the president that there was a 60 to 80 percent chance Osama bin Laden had been located in a compound in Pakistan that the C.I.A. had been scouting for months, and the president needed to decide whether he would move ahead with an air strike or a ground strike, or if he would wait to gather further intelligence.

Around 7 p.m. that evening, Mr. Baquet followed up: "I don't want to trash the small and medium size papers that really care about this. It's just the way we feel." (For the record,  The Observer is a small-size paper, and does not officially attend the dinner.) 

It was Friday morning at 8:28 a.m. in New York and  The Observer scanned news of the Royal Wedding in London, which attracted approximately 22 million viewers in the U.S. As we prepared to head to D.C. to further inspect the Correspondents Dinner attendees up close, a meeting was taking place in the White House Diplomatic Room. Before boarding a helicopter to Alabama to survey flood damage, the president called his senior aides in and told them: it would be a helicopter strike. Security Adviser Tom Donilon; his deputy, Denis McDonough; and counterterrorism advisor John Brennan decided to move forward with Operation Geronimo, scheduled to take place on Saturday.

That evening in the W Hotel lobby, one of the first of the weekend's various parties had begun. Around 8:30 p.m. Hilda Solis, dressed in fuchsia, was ushered past New Yorker party security. "Secretary of Labor," her handler said to a young man with earpiece and iPad. Secretary Solis bounced in place to the elevator music. Forty-five minutes later editor David Remnick rested a plate of sushi on a table and debriefed The Observer. "Do you know about Mike Kelly?" In 1987, Kelly, then a  reporter, set the precedent for outrageous escorts by bringing Fawn Hall, Iran-Contra femme fatale. Kelly was killed reporting in Iraq in 2003. Asked about the decision by his former employer, The Washington Post, to bring Donald Trump as its guest of honor, Mr. Remnick replied, "Well, that should be interesting because I just ripped his ass. I'll have to stop by and say, 'Hi'."

About an hour later, The Observer intercepted the dinner's emcee, Saturday Night Live head writer Seth Meyers, who provided intelligence on the impending roast of the president, a tradition of the annual dinner. Mr. Meyers was not nervous, "healthy butterflies," he said. "It's easier to make fun of a politician you do like," he said. "It comes off as less angry."

Saturday morning. Operation Geronimo had been rescheduled due to weather.

The weather was just fine at Tammy Haddad's annual Garden Brunch--held at the former home of the late Washington Post publisher Katharine Graham, which is now owned by venture capitalist Mark Ein--the weekend's festivities now in full swing. The Observer spotted New York Times reporter Mark Leibovich, who is reportedly working on a book about the incestuousness of beltway culture. Also in attendance were Olympic snowboarder Shaun "The Flying Tomato" White, Morgan Fairchild and Chace Crawford. Rupert Murdoch was ushered from the living room to the patio after being approached by reporter Gabriel Sherman, known to be working on a book about Fox News. Actor Tim Daly, in beard, shades and a threadbare velvet blazer, went largely unrecognized and explained to another guest that he wanted to meet Buzz Aldrin, who was being wheeled around the patio. He played [astronaut] Jim Lovell in the HBO series, he explained. Rosario Dawson, a guest of CNN, made sure to note that she was invited because of her advocacy work and not her celebrity status.

Mid-afternoon, REM bassist Mike Mills convinced an unidentified suit to submit to the powers of magician Gerard Senehi. "Mentalist," Mr. Senehi corrected. "If you call me a magician again, I'll kill you." Mr. Senehi correctly guessed the foreign word the suit has written on the back of his MSNBC business card. It was already written on Mr. Senehi's own business card, which he extracted from his wallet, to Mr. Mills' delight.

The Palin family arrived surrounded by photographers and clamoring fans and a TV producer was seen bragging about having given Sarah Palin his card.

Later that evening in the reception room of the Washington Hilton, a throng of people, including Don Cheadle, Scarlett Johansson and Jeremy Piven, began moving toward the main hall of the hotel for the White House Correspondents Dinner. Greta Van Susteren engaged Donald Trump as a crowd looked on.  The Observer asked Mr. Trump who he was excited to meet at the dinner. "Everyone. Everyone," he said.  A Washington Times reporter thrust her comically oversize microphone at him: "Mr. Trump, what do you have to say about the rumor that Kim Kardashian will be your running mate?" He answered without looking at her: "That's, uh, I can't, that's not true." She persisted: "What about Khloe?" Trump and the throng trudged forward: "No, no." The reporter grinned as she turned away, pleased with her line of questioning.

At approximately 8:30 p.m., the president arrived at the dinner. Shortly thereafter, he left the dais, following Secretary of Defense Robert Gates' lead. As revelers continued to sip their Champagne, the president was informed the Libyan leader Muammar el-Qaddafi's son had been killed by a NATO airstrike.

An hour later, the New York Times reporter Peter Baker won the Aldo Beckman Award for his "deep insight about how Obama operates, from his response to the terrorist threat to his struggles to contend with what the president himself called our 'big, messy democracy.'"

At 10:22 p.m. Seth Myers was well into his routine for the evening. "People think bin Laden is hiding in the Hindu Kush," said Myers, "but did you know that every day from 4 to 5 he hosts a show on C-SPAN?" The president laughed heartily. Myers later noted: "I am, of course, contractually obligated to attend the MSNBC party. Everyone knows how the MSNBC party works: President Obama mixes the Kool-Aid, and everyone drinks it."

An hour later, The Observer was at the Italian embassy for the MSNBC party, where Rachel Maddow mixed drinks and tended bar below a sign that glows in cursive, pink-neon lettering: RACHEL'S BAR." The Observer asked her if she thought the dinner was a little too cozy. "I don't go to the dinner, I just go to this," she said. "What are you asking me is too cozy? That thing that I didn't go to that I don't know anything about? You should ask me about something else. I didn't go!"

The Observer asked MSNBC president Phil Griffin how the evening was going for him: "It gets better because, you know, we're making a statement," he said. "An event like this, we're letting everybody know, we're here. We're in Washington, a place for politics, we should be celebrated on a night like tonight. It's a night to let all the issues be put aside for one moment to step aside and enjoy yourself. O.K.?"

Eliot Spitzer entered the party. "I thought journalists weren't working tonight," he told The Observer.

At 1 a.m., Cee-Lo took the stage. The Observer squeezed its way over to Sarah Palin, holding court with the largest crowd at the party. Sean Penn was sitting across the room at a table with four other people, including REM's Michael Stipe. Ms. Palin, for her part, was vocal about the role of the press in such proximity to the president. "Well, I still would like the White House Press Corps to ask our president a bit tougher questions about where he really wants to go with this economy and does he understand and believe in free markets or does he really believe in government's ability to plan our economy for us? So I want the press corps to ask those questions!"

The next morning, the weather was nice in Pakistan--nice enough that Operation Geronimo received another green light. In Washington, it rained, but President Obama was reported to have played nine holes of golf.

Just after mid-day in the Hay-Adams Hotel Penthouse , the Reuters-McLaughlin Group Brunch was filling up; on the terrace, attendees noted a spectacular view of the White House. Inside, a caterer spilled an entire dish of butter onto The McLaughlin Group's Eleanor Clift.

Around 2 p.m., the president met with the core Operation Geronimo team before the final "go" order was given.

A few minutes before at the brunch, the Financial Times New York editor Gillian Tett was cornered by anti-tax lobbyist Mark A. Bloomfield, the president and CEO of the American Council for Capital Formation. Post-business-card exchange with Mr. Bloomfield, she talked to The Observer about her table's guests: "We had both the chairman of the S.E.C. and the chairman of the F.D.I.C. We weren't expecting to get both and they both said yes immediately. You know what's brilliant about the whole evening? Most of the time all these people would be at loggerheads, and at this, they're all relaxed."

"When you put them all in a room together and it's 3,000 people and it's all the show-business stuff, it looks kind of icky," said FT columnist John Gapper. "But actually, the reality is: How am I not supposed to not ever have lunch or talk with these people? You get a story out of it."

But the story was happening elsewhere. At 3:45 p.m. EST/12:45 a.m. PKT, explosions were heard by locals in Bilal Town, a suburb of Abbotabad.

An IT guy Abbotabad noted over Twitter: "A huge window shaking band here in Abbotabad Cantt. I hope it's not the start of something nasty :-S"

At 3:50 p.m.: Osama Bin Laden was "tentatively identified as dead."

At 7:01 p.m.: Osama Bin Laden was positively identified.

At 8:30 p.m.: President Barack Obama was given a final briefing on the operation.

And at 9:45 p.m., every major television network interrupted its broadcast with an update that the president would be briefing the nation. The Apprentice was cut short before America could find out who had been fired.

11:35 p.m.: News of the operation had already leaked out through unofficial outlets on Twitter feeds, some of which had been formerly sprinkled with the Correspondents Dinner's preferred cutesy moniker for itself: "#nerdprom." At 10:24 p.m., Donald Rumsfeld's Chief of Staff and Navy Reserve intel officer Keith Urbahn tweeted, "So I'm told by a reputable person they have killed Osama bin Laden. Hot damn."

Then the president addressed the nation. Nearly ten years after 9/11, Osama bin Laden was dead.

The biggest story of 2011--the behind-the-scenes workings of which had happened within single-digit miles of the elite of the nation's press corps, in closer mass proximity to the president than they are at nearly any other time of the year--had broken.

And it had not leaked. Except perhaps at 10:24 to Urbahn, and via Dwayne Johnson, better known as The Rock. "Just got word that will shock the world - Land of the free... home of the brave DAMN PROUD TO BE AN AMERICAN!"

Mr. Johnson did not attend the dinner. 

kstoffel@observer.com, fkamer@observer.com

Federal Budget: George Pataki creates new group to push 2012 candidates on debt issues. [Devlin Barrett]

Economy: Bernanke will face the media next week. [Jon Hilsenrath]

2012: Americans Elect party to hold Internent nominating convention next summer. [Greg Lucas]

2012: Editors refer to "Westcheter's own Donald Trump." [Lohud.com]

2012: Will Trump ever drop birther claims? [Jay Jochnowitz]

2012: Trump's claim of having sent PI's to Hawaii was reference to new, investigative book about Obama? [Drudge]

2013: Quinn clashes with Bloomberg on allowing immigration officials to comb through records of inmates at city jails. [Michael Saul]

2013: Spitzer criticizes Cuomo's budget; doesn't rule out mayoral run. [NY1]

Taxes: New study "provides some of the most detailed evidence yet that so-called millionaire taxes have little effect on the movements of millionaires as a whole." [Robert Frank]

Trump's Mail: Birther talk leads Seinfeld to ditch Trump event; Trump sends angry letter. [Page Six]

Bloomberg's Initiative: Enough solar power to supply 50,000 homes. [Henry Goldman]

Bloomberg's Initiative: First update to 4-year-old PlaNYC. [AP]

Same-Sex Marriage: Conference call yesterday with LGBT outlets and progressive bloggers. [Paul Schindler]

Same-Sex Marriage: Cuomo's comma director says "the governor is committed to working with New Yorkers to get the marriage equality legislation passed."

Same-Sex Marriage: Fundraisers explains Cuomo's upcoming campaign event "underscores the governor's pledge to push for the passage of same-sex marriage legislation." [Rica Orden]

Same-Sex Marriage: Republican James Alesi, who voted no is now undeclared. [Joseph Spector]

Poverty: "Are as many as 7 in 10 Kiryas Joel residents really poor?" [Sam Roberts]

Transit: MTA wants to sell their headquarters; price is more than $150 million. [Charles Bagli]

Unions: "Negative retirement incentive" in Cuomo's deal with Council 82. [Casey Seiler]

Fracking: Lobbying money hits nearly $1,600,000 last year. [David King]

Neighborhood Names: Hakeem Jeffries wants to regulate them. [Cara Buckley]

Central Park Jogger: Editors okay with another case to settle any questions. [New York Post]

Rangel: Powell says low voter-turnout keep incumbent in office. [Frank Lombardi]

Member Items: Don't go back to business as usual. [Syracuse Post-Standard]

Photos: Bloomberg, Rahm, and Daly. [Flickr]