Johnson Resigns, Joins the Subprime Hall of Shame
Maybe it’s just me, but if I happened to find myself as, say, the head of a government-sponsored agency that buys mortgages from lenders and packages them into securities to sell to investors, thereby providing needed capital to keep the housing market moving, I might make a mental note to be particularly careful about any possible conflicts of interest when I was ready to take out real estate loans for myself.
Apparently that thought never crossed Jim Johnson’s mind. News just broke that Johnson has resigned, but I’ll leave it to the political bloggers to keep chronicling the campaign fallout from the former Fannie Mae CEO’s deals with Angelo Mozilo, who headed the subprime mortgage lender Countrywide Financial Corp. until it began imploding last year. The controversy has spread from Johnson’s mortgage deals to his long history as a Washington insider, and Sen. Barack Obama’s judgment in appointing him as a vetter. I’m not going there. I’m just still fascinated that Johnson ever sought to get a mortgage in this way, and how much it’s going to cost him now.
Unless you happen to be personally familiar with Johnson’s credit score, it’s impossible to tell exactly how special his special treatment was and how great a deal he got on his loans, especially compared to the average homeowner who signed up with Countrywide. As someone who was borrowing a total of $7 million, it’s also curious as to why he would be worried about shaving off a point here or there. But it also doesn’t matter, since that’s not really the issue. I like the way Mickey Kaus summed it up:
Johnson headed Fannie Mae. If Fannie Mae was really “the biggest buyer of Countrywide’s mortgages,” should Johnson really have gotten enmeshed as a consumer with Countrywide, particularly if it was hard to tell if he was getting a special deal or not.
It’s true that, at the time of Johnson’s loans, no one knew that the subprime market would soon collapse and that Mozilo would wind up as the latest poster boy for corrupt corporate CEOs. But the housing crisis has become so toxic, and its meltdown so severe, that anyone who seems to have crossed over to the subprime side for any reason, or benefited in any way, will face a long road toward redeeming himself.
So welcome, Jim Johnson, to the Subprime Hall of Shame. Join former Texas Sen. Phil Gramm, who was advising Republican presumptive nominee Sen. John McCain on the mortgage bailout while lobbying for the investment bank UBS. Add U.S. Rep. Laura Richardson, a Democrat from California, who faces foreclosure on three homes and whose workout terms with a lender appear to be unusually favorable.
It may not be exactly fair that Johnson or some others who get entangled in the subprime crisis at different levels all end up in this group. But as Jim Rokakis, the treasurer of Cleveland’s Cuyahoga County points out, nothing’s been fair about this crisis. Now it’s Johnson’s turn to learn that lesson.