Obama's Friends at Fannie Mae

To be sure, the nation’s current financial mess is a bipartisan disaster — but how curious it was to hear Barack Obama at the first debate claim that he sounded warnings two years ago.  Perhaps he did, but some us of would like to hear more about the warnings and the letter he says he wrote to the Secretary of the Treasury urging a meeting of all “stakeholders.”  

After all, many of Sen. Obama’s friends, advisors and fellow Democrats have direct connections to the quasi-governmental agency at the center all this — the Federal National Mortgage Association, better known as Fannie Mae.  

Back in 2004, Fannie was embroiled in an accounting scandal and in October of that year, the House conducted hearings.  According to the Wall Street Journal, the staunchest defenders of Fannie were members of the Congressional Black Caucus.  By a strange coincidence, the Fannie Mae Foundation was making annual contributions to the Caucus.  And get this – Maxine Waters (D-CA) “cooed all over Mr. Raines” and Clay Lacy (D-MO) “played the race card by calling the hearings a ‘political lynching’ of Mr. Raines.”

That would be Franklin Raines, an African American who stepped down as chairman and CEO of Fannie Mae on December 21, 2004.  This followed an investigation by the Office of Federal Housing Enterprise Oversight (OFHEO) and the Securities and Exchange Commission (SEC) that accused Fannie of cooking the books so that its officers could “earn” big bonuses.   Two years ago, the OFHEO filed suit against Raines to try to recover the $50 million in payments that were made to him based on the faulty accounting.  He settled for a small fine that was paid by Fannie’s insurance company.  

Connection to Sen. Obama:  Both Raines and Obama insist there is no connection, but he is likely a behind-the-scenes advisor.  The Washington Post has reported that Raines had “taken calls from Barack Obama’s presidential campaign seeking his advice on mortgage and housing policy matters” and that Raines is a member of Obama’s “political circle.” Obama did not request a correction until after a McCain ad quoted the paper.

Next is J. Timothy Howard, who resigned along with Raines and who was Fannie’s Chief Financial Officer.   In that position, he was a key figure in shaping the company’s books to make it seem that Fannie had reached goals that would lead to executive bonuses.  Howard was part of the Raines settlement.  His connection to Barack Obama:  Murky at best but likely since Howard is tied to Raines.  

It’s interesting to note that by 2006, both Raines and Howard were being investigated by both the OFHEO and the SEC, by then headed by Christopher Cox, whom Sen. McCain now wants to see fired.

Then there is Jamie Gorelick, a Harvard lawyer who always seems to turn up in interesting places.  You’ll remember her as a member of the 9/11 Commission and the criticism of her related to a “wall” that may have limited the ability of agencies to cooperate against terrorism.  Turns out that she was Vice Chairman of Fannie Mae from 1997 until 2003 — smack in the middle of the accounting scandal.  On March 25, 2002, Business Week quoted her as saying about the agency, “We believe we are managed safely.”  Gorelick was among those who received large bonuses.  

Her connection to Obama:  None that we know of other than her association with the Democratic Party.

Next is Jim Johnson, a Democratic figure dating back to the Carter years.  He was CEO of Fannie Mae from 1991 until 1998 (preceding Raines) and was a subject of the OFHEO investigation.  The investigation showed that Fannie had substantially underreported Johnson’s compensation, listing it as $6 million when it was really some $21 million.  

Johnson is a strong Obama supporter who was tapped to head up the vice-presidential selection committee.  He had to drop out when it was disclosed that he received a sweetheart loan from Countrywide Financial, as had Mr. Raines.

We should also mention former Clinton Commerce Secretary William Daley who served as a Fannie Mae board member collecting stock options and director’s fees and whose son Bill Jr. was a Fannie Mae lobbyist from 2002 until 2005.  His connection to Obama:  The Politico reports that he is serving as an advisor for the senator and he has been mentioned as a potential Treasury Secretary in an Obama administration.

Of course, Sen. Obama himself is second on the list of campaign contributions from Fannie Mae since 1989.  Regardless of what he may have stated at the debate, the Washington Post editorialized on September 19, 2008, “In 2006, [McCain] pushed for stronger regulation of Fannie Mae and Freddie Mac while Mr. Obama was strangely silent.”  Perhaps his $126,000 in contributions kept him that way.

Obama now claims to champion “Main Street” by fighting against so-called golden parachutes for CEO’s.  That’s something he should know about since so many of his friends and advisors have hands-on experience with creating them.