Before we leave the subject of Barack Obama's ill-fated selection of James A. Johnson to vet potential vice presidential candidates, we should consider what it says about the presumptive Democratic presidential nominee's judgment and his understanding of the way Washington works.
In choosing Johnson, who abruptly resigned last week after his controversial business dealings began to smell, was Obama sending a signal that Beltway insiders have little to fear from his vow to change the way Washington does business? Or was it just another case of Obama being too trusting? After all, it took him 20 years to figure out that his pastor, the Rev. Jeremiah Wright, was a raving bigot. He also now wishes he had never heard of Tony Rezko, a Chicago businessman who helped him purchase a $1.6-million house. Rezko was convicted recently on 16 counts of mail fraud, wire fraud, money laundering and aiding and abetting bribery (Obama was not implicated in any wrongdoing).
Obama, a freshman U.S. senator who apparently has a lot to learn about Washington, probably didn't think Johnson needed vetting. After all, he ran Walter F. Mondale's 1984 presidential campaign and vetted potential vice presidents for both Mondale and John F. Kerry. Obama has now learned the hard way that Johnson, often described as "the ultimate Washington insider,'' and his kind represent much of what most Americans resent about Washington — the convenient ethics, the insider dealings for power and money, the revolving door that allows insiders to go from politics and government into the private sector and back.
On the campaign trail, Obama has vowed to break the influence of these Washington insiders and the special interests they serve. He has denounced obscene CEO compensation and sub-prime mortgage lenders he blames for the crisis in home foreclosures.
Then, in his first major decision as a presidential nominee, Obama tapped a man who is a symbol of both corporate excess and Washington incest to lead the search for a running mate. Johnson accepted sweetheart loans from a sub-prime mortgage giant and served on the board of five companies that handed out lavish compensation packages to their chief executives.
The Wall Street Journal recently reported that Johnson received almost $2-million in loans from Countrywide Financial, a major subprime lender at the center of the mortgage crisis, through an informal program for friends of the company's CEO, Angelo Mozilo, at an interest rate below the market average. Some of loans were approved while Johnson was serving as chief executive officer of Fannie Mae, the government-sponsored entity that guarantees mortgages for millions of homeowners.
Fannie Mae purchases mortgages from Countrywide, and that apparently is how Johnson and Mozilo became friends. Obama has called Mozilo and another Countrywide executives "the folks who are responsible for infecting the economy and helping create a home foreclosure crisis.''
It's not clear why Johnson needed favorable loan terms. His paycheck at Fannie Mae was in the millions of dollars a year. In 1998 alone, his compensation package topped $21-million. After he stepped down from the top job at Fannie Mae, he became an outside consultant for the organization at an inflation-adjusted starting salary of $300,000 a year. Fannie Mae also threw in a car and chauffeur, two staff assistants and an office at the Watergate.
The Obama campaign first described the media scrutiny of Johnson's loans as "overblown and irrevelant.'' Then Obama snippily asked if he was supposed to hire a vetter "to vet the vetters?''
In Johnson's case, that would have been money well spent. Obama might have discovered that Johnson, as a member of the board of United HealthCare and the head of its compensation committee, played a key role in granting the company's chief executive, William McGuire, more than $1.4-billion in stock options. McGuire resigned and returned $618-million as part of a settlement with shareholders and federal regulators.
United HealthCare showed its appreciation for Johnson's work by granting him stock options valued at $175-million and an annual director's fee of $400,000, according to the New York Times.
By the way, Obama introduced legislation in the Senate last year to give shareholders an advisory role in setting executive pay. He said the intent of the bill was to "force corporate boards to think twice before signing over millions of dollars to CEOs.''
Maybe Obama will want to think twice before giving important jobs to unvetted Washington insiders who give greed a bad name.
Philip Gailey's e-mail address is firstname.lastname@example.org.