I've just returned from several days of discussion, in a New York private seminar, of the major issues confronting the next American president in January 2009. I'll deal with some of these in an article later in the week. Offstage at the same meeting, however, there was much political gossip concerning vice presidential nominees and near-term non-policy issues. One matter involved the possible irregular relationship of Jim Johnson, head of Sen. Barack Obama's vice presidential search team and a former Fannie Mae chairman, with Countrywide Financial CEO Angelo Mozilo.
- Sens. Obama and Hillary Clinton had nearly identical substantive agendas — thus, attention began to turn early in the Democratic contest to non-policy issues, including most notably Obama's race and Clinton's gender. Obama came under fire for statements by his wife and his pastors and for his association with a recently convicted Chicago fixer. Clinton's husband, former President Bill Clinton, was charged with playing a crude race card against Obama, and both Clintons' financial statements and tax returns were being scrutinized, at the point of Clinton's withdrawal, for their sources of sudden multimillion-dollar wealth.
- Sen. John McCain had clear policy differences with his principal rival, former Massachusetts Gov. Mitt Romney, for the Republican nomination, but Romney dropped out so soon that these never came clearly into focus. With Romney gone, McCain was left to fight off nuisancesome challenges by diehard ideological and religionist doubters. He was belabored, however, by reports dealing with alleged special-interest legislative pleadings, his in-laws' finances, and his relationship with a female Washington, D.C., lobbyist.
Public attention will not turn fully to policy differences between Obama and McCain — and they are sharp and clear — until both candidates have chosen running mates and the general election campaign begins. For the time being, issues of character and possible scandal will keep being raised, with the Johnson story being the most recent example.
No place like homes
The Wall Street Journal broke the story Saturday, June 7, that both Johnson and his successor at Fannie Mae, ex-Seattleite Frank Raines, may have gotten special below-market loans and favors from Mozilo while heading Fannie Mae, a quasi-public, shareholder-owned entity which often has been challenged for receiving what some see as unmerited taxpayer protection.
Fannie Mae's code of conduct requires prior disclosure of the kinds of transactions Johnson and Raines allegedly had with Countrywide, as well as formal prior approval by the Fannie Mae board. Raines was forced to resign from Fannie Mae four years ago and this spring agreed to a settlement amounting to a $1.8 million charitable contribution. He got multiple financings from Countrywide. His Washington, D.C., home is now listed for sale at $7.6 million. Johnson also received multiple Countrywide financings at low rates. He got loans for homes in Palm Desert, Calif., Washington, D.C., and Ketchum, Idaho. Johnson led Fannie Mae from 1991 to 1998, during which time he worked with Mozilo closely for what Mozilo characterized as "making the process more efficient by the use of credit scoring." A housing boom ensued, which profited both Fannie Mae and Countrywide but which has contributed to the current housing and related international credit crises. Embattled Countrywide is now under investigation for securities fraud.
Raines walked the plank in 2004 after Fannie Mae was found in violation of accounting rules while trying to burnish its balance sheet and for not using adequate risk controls. Johnson, Raines' predecessor, was neither charged nor penalized in the matter.
As it happens, I have known Johnson since he was a mid-1960s officer of the National Student Association and, later, an assistant to then-Sen. Walter Mondale. He moved with Mondale to the vice presidency and then, in 1984, surprisingly was named his presidential campaign chairman — a position which normally would go to a senior, independent figure and not to a candidate's former staff assistant. His former staff colleagues were, to say the least, surprised. Johnson got mixed reviews in that role. He reportedly urged Mondale to pledge a tax increase in his 1984 acceptance speech at the San Francisco Democratic convention — a pledge which buried his candidacy before it began — and also was a principal sponsor of then-Rep. Geraldine Ferraro as his running mate. (Later, it turned out, Ferraro's husband had questionable associations unknown when Mondale offered her the job.) He fired and then was forced to rehire Democratic Chair Chuck Manatt during the convention.
After Mondale's defeat, Johnson set about making money and gaining influence in the capital, eventually becoming Fannie Mae chair and, now, vice chairman of Perseus, a merchant bank which has major publishing holdings. (One of its subsidiaries published the recent book by Scott McLellan, the former Bush press secretary.) He has been chair of the Kennedy Center for Peforming Arts. He contributes both political and charitable money. He serves on corporate and non-profit boards.
In 2004, Johnson took on for Sen. John Kerry the same vice-presidential search role he now fills for Obama. He and Kerry, it was reported, first attempted to recruit McCain as Kerry's running mate. Eventually, North Carolina Sen. John Edwards got the job. After making an initially strong impression in the campaign, Edwards' performance ran downhill. He became nearly invisible in the period before Election Day.
I have no idea whether Johnson received inappropriate special treatment from Countrywide — which he should not have done as Fannie Mae chair. We no doubt will find out soon. Nor has he been implicated in the Fannie Mae book-cooking that brought Raines down. That matter may now be revisited.
I am inclined to give Johnson the benefit of the doubt regarding the recent charges — and the old Fannie Mae charges as well. For one thing, I do not think he is so stupid, having gotten very rich, to have risked sanctions and his reputation for some below-market-rate personal mortgage loans.
But I was surprised that Obama chose Johnson to lead his running-mate search. Many senior present and former public officials come to mind who both know and could make wise judgments about possible V.P. candidates — but who are not so directly a part of the capital culture Obama has pledged to end.
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