The Wall Street Journal tears into Barack Obama in a lead editorial this morning for his hypocritical standards on the housing crisis. After yesterday’s performance by Obama in which he declared that Jim Johnson didn’t work for him and that he had no obligation to vet the vetters, the Journal wonders what responsibilities Obama thinks the presidency entails. The editors also wonder what happened to Obama’s pledge of a new kind of clean politics, and the change he would bring to DC:
Barack Obama may have come up with a creative way to solve the housing recession: Let everyone buy property at a discount the way he did from Tony Rezko, and give everyone in America a discount mortgage the way Angelo Mozilo of Countrywide did for Fannie Mae’s Jim Johnson. Team Obama’s real estate and mortgage transactions are certainly a change from business as usual. They suggest old-fashioned back-scratching below even current Beltway standards.
A former CEO of mortgage financing giant Fannie Mae, Mr. Johnson is now vetting Vice Presidential candidates for Mr. Obama. But he is also a textbook case for poor disclosure as regulators sifted through the wreckage of Fannie’s $10 billion accounting scandal. Despite an exhaustive federal inquiry, Mr. Johnson managed to avoid disclosing one very special perk: below-market interest-rate mortgages from Countrywide Financial, arranged by Countrywide CEO Angelo Mozilo. Journal reporters Glenn Simpson and James Hagerty broke the story this weekend.
Fannie Mae tells us that Mr. Johnson did not inform the company’s board of these sweetheart mortgage deals, nor did his CEO successor Franklin Raines, who also received such loans. We can understand why. Fannie bought mortgages from loan originator Countrywide, and then packaged them into securities for sale or kept the loans and profited from the interest. Mr. Mozilo told Dow Jones in 1995 that he was “working very closely . . . with Jim Johnson of Fannie Mae to come up with a rational method of making the process more efficient by the use of credit scoring.”
Since Fannie was buying Countrywide’s loans, under terms set by Mr. Johnson and later Mr. Raines – or by people in their employ – the fact that Fannie’s CEO had a separate personal financial relationship with Countrywide was an obvious conflict of interest. The company’s code of conduct required prior approval of such arrangements. Neither Mr. Johnson nor Mr. Raines sought such approval, according to Fannie.
The choice of running mate is the most important decision a nominee must make, and the manner in which that decision is made (and the choice itself) speaks volumes about the candidate. Unlike Barack Obama’s very strange declaration yesterday, it is hardly “tangential” to the campaign, but goes to the judgment and responsibility of the nominee. His selection of advisers also demonstrates the candidate’s judgment, and picking a longtime party fixer with serious ethical issues doesn’t portend a housecleaning for DC but a corrupt administration, and possibly a President who is more front man than leader.
Johnson’s selection shows a tremendous amount of hypocrisy as well. Countrywide got used as a punching bag by Obama himself on the campaign trail. Selecting Johnson gives us one of two conclusions: either Obama lied about his anger over Countrywide and used it for just another populist red flag, or he didn’t bother to check Johnson out at all. If the latter, what does that say about who a President Obama would appoint to other important posts, and how those appointments would get made?
Obama doesn’t need to hire vetters to vet the vetters. He needs to take responsibility for his own appointments. If he can’t do that, what business does he have in the Oval Office — and who would really be running the White House in an Obama administration if he shrugs off even this basic responsibility?
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