There goes another one

Obama seems blind to the ethical problems of his associates

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A day later than would have been politic, Jim Johnson joined the burgeoning crowd under Barack Obama's bus.

Mr. Johnson, the CEO of the Federal National Mortgage Association (Fannie Mae) from 1991 to 1998, was named last week to head Sen. Obama's vice presidential search committee.


Jack Kelly is a columnist for the Post-Gazette (jkelly@post-gazette.com, 412 263-1476).

The Wall Street Journal reported Mr. Johnson received $1.9 million in loans at below market rates from Countrywide Financial, thanks to his friendship with Countrywide CEO Angelo Mozilo. This was embarrassing for Sen. Obama, because he has laid much of the blame for the subprime mortgage crisis on Countrywide.

In a press conference in St. Louis Tuesday, Sen. Obama dismissed criticism of Mr. Johnson as "a game," and said he would keep him on.

"Obama's cavalier response utterly contradicted his campaign's supposed crusade for reform," said pundit Craig Crawford. "Not only did these words come across as tone deaf to the very ethical issues that he has raised in this election, but his remarks sounded like the ethical relativism we so often hear from the Washington business-as-usual crowd that Obama claims to be running against."

A day later, after The New York Times and The Washington Post raised more serious questions about Mr. Johnson, he resigned.

In 2004, it was learned that Fannie Mae executives had concealed $10.6 billion in losses through questionable accounting practices. This was about 19 times the size of Enron's losses, but attracted much less media attention, perhaps because, as Slate's Daniel Gross put it in a 2004 article, Fannie Mae "has become something of a holding pen for key Democrats."

The accounting fraud was discovered on the watch of Mr. Johnson's successor, Franklin Raines. But federal investigators concluded the scandal was rooted in a corporate culture that dated back 20 years.

"The accounting manipulation for 1998 resulted in maximum payouts to Fannie Mae's senior executives -- $1.9 million in Johnson's case -- when the company's performance that year would have otherwise resulted in no bonuses at all," The Washington Post reported.

Mr. Johnson served on the boards of five corporations that granted their senior executives the kind of lavish pay packages Mr. Obama has denounced, The New York Times reported.

Mr. Johnson's resignation prompted a question from Tim, a reader of National Review Online, who wondered: "How do you accept the resignation of someone who doesn't work for you?"

Tim's tongue-in-cheek question was prompted by the most remarkable thing Mr. Obama said in his St. Louis press conference. There was no need to vet the people he appointed to his search committee because "these aren't folks who are working for me."

"It was enough to make you wonder if the three had somehow broken into Obama's office, stolen his letterhead stationery and appointed themselves to interview the capital's good and great about who should join Obama on the Democratic ticket," wrote Jim Hoagland of The Washington Post.

If at that press conference Mr. Obama had announced Mr. Johnson's resignation and admitted his campaign goofed by not checking his background more thoroughly, this story would be over now, and he wouldn't look so silly. But Mr. Obama seems blind to the ethical implications of his associations, and initially dismisses criticisms when others raise them. Then, as criticism builds, he throws under the bus those like the Rev. Jeremiah Wright and convicted financier Tony Rezko to whom he initially pledged loyalty.

We may see this pattern repeated soon. The more problematic appointment to his vice presidential search committee may be Eric Holder, deputy attorney general during the Clinton administration. Mr. Holder was a key figure in the last-minute pardon of fugitive financier Marc Rich, whose ex-wife, Denise, was a major contributor to Clinton campaigns and to the Clinton library fund.

Mr. Rich, who fled to Switzerland to avoid prosecution on 51 counts of tax fraud, was not eligible for a pardon under Justice Department guidelines. But Mr. Holder circumvented normal procedures and kept other Justice Department lawyers in the dark. A congressional committee described his conduct as "unconscionable."

If Mr. Obama were as smart as he imagines himself to be, he would have thrown Mr. Holder under the bus at the same time as Mr. Johnson. But some people are slow learners.



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