Obama's big fat Countrywide mess

Whether he jumped or was pushed, veep vetter James Johnson is gone. Will the campaign do better the next time it gets caught in a toxic housing bust tarpit?

Published June 11, 2008 10:24PM (EDT)

Live by the conflict-of-interest sword, die by the conflict-of-interest sword. When you combine together all the dirt dug up on Obama's veep vetter, James Johnson, by the Wall Street Journal, New York Times and the Washington Post, you can't avoid the conclusion that the whole affair adds up to one of the campaign's more serious missteps so far.

It's not just the unseemliness of a former head of Fannie Mae, a government sponsored enterprise back-stopping the entire U.S. home mortgage market, getting seven million dollars worth of what appear to be cushy mortgage deals personally orchestrated by Countrywide CEO Angelo Mozilo. Obama has also thundered against excessive CEO compensation; Johnson was an excessively compensated CEO who arranged excessive deals for other CEOs. Obama has made reforming how the housing market is regulated a centerpiece of his economic platform; as Fannie Mae's CEO, Johnson worked closely with Mozilo facilitating what became an out-of-control mortgage boom. The massive accounting irregularities discovered at Fannie Mae after Johnson was no longer CEO (but still a consultant) don't help either.

Johnson resigned on Wednesday, just three days after the initial Wall Street Journal scoop, but Republicans are naturally making hay. One could wish that the Wall Street Journal editorial pages applied the same stinging standards of scorn and high dudgeon to McCain's economic adviser, former senator Phil Gramm -- whose culpability in Wall Street's misdeeds far exceeds anything Johnson was guilty of -- as it has to Johnson, and one can scoff at the lobbyist-ridden McCain campaign's attempts to bandy about the charge of hypocrisy, but that's neither here nor there. James Johnson symbolizes exactly the kind of incestuousness between Washington politics and corporate special interests that Obama has regularly inveighed against. Given the special role that the housing bust has played in the country's current economic woes, any association with a former CEO of Fannie Mae should have been given special scrutiny.

Of course, that's easy to say in hindsight. When they chose James Johnson to run the vice presidential selection process Obama's advisers may have been primarily focused just on getting the veep vetting under way, immediately after clinching the nomination, as part of a strategy to deflect the furor over whether Obama would pick Hillary Clinton as his vice presidential candidate. At first glance one can understand why it might have looked like a safe choice: after all, Johnson was the guy who helped Kerry and Mondale pick their VPs. Presumably he had been pre-vetted! (Though, also in retrospect, that resume doesn't seem like all that great a recommendation. Geraldine Ferraro's husband turned out to be up to his neck in financial improprieties, and John Edwards didn't even carry his own state in the general election. Maybe some fresh blood was called for.)

But the real problem was Obama's initial response:

Well, look ... first of all, I am not vetting my vice presidential search committee for their mortgages. I mean this is a game that can be played -- everybody you know who is anybody who is tangentially related to our campaign I think is going to have a whole host of relationships… These aren't folks who are working for me. They are not people, you know, who I have assigned to a job in the future administration.

(David Axelrod didn't do much better on MSNBC: "He's a volunteer, and the job is just to gather information, period… We honestly didn't ask him for his mortgage statements or his financials… He's not advising us on housing policy, he's not advising us on any of the matters that are related to this… We can't vet all the vetters.")

As MSNBC's FirstRead observed, "Seriously, this may be the worst answer Obama has ever given in print. Overall, the campaign seemed surprisingly unprepared for the vetting of the vetter."

The name Countrywide is radioactive waste to millions of Americans. The revelation that former CEOs of Fannie Mae were getting their loans personally handled by Angelo Mozilo is a big deal. That isn't just any "relationship." That's a connection to a star player in a major economic disaster, revealed to the general public just as Obama was starting off a two week campaign swing with the express intent on focusing on the economy. Rather than attempt to brush it off, Obama should have recognized immediately that his campaign was entering dangerous territory. He should have kept his counsel and then dumped Johnson like a hot rock.

Again, easy to say in hindsight, especially after the New York Times and Washington Post unleashed their salvos -- and undoubtedly sealed Johnson's fate. The good news for the Obama campaign is that this too shall pass -- the general election is still five months away, and a week from now James Johnson will be old news. But a myriad more mini-controversies are waiting in the wings, and how Obama responds to those is the real question. Here's a hint -- if Countrywide, overpaid CEOs, and financial accounting irregularities are involved, maybe it would be best to steer clear.

By Andrew Leonard

Andrew Leonard is a staff writer at Salon. On Twitter, @koxinga21.

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