Obama Advisor Pledged $1 Trillion in Loans at Fannie

James A. Johnson--the man chosen by Sen. Barack Obama to lead his vice presidential search committee---served as head of the Federal National Mortgage Association, or “Fannie Mae,” from 1991 to 1998, receiving a reported $21 million in compensation upon his departure.

As CEO of Fannie Mae, Johnson set a goal of buying up $1 trillion in low-income mortgage loans, a move that eventually helped trigger what would become the sub-prime mortgage crisis.

>snip

Fannie Mae opposed any attempt to regulate or monitor that business. In 1992, Congress considered a proposal requiring Fannie Mae and Freddie Mac to disclose their debt to the Securities and Exchange Commission (SEC). Public disclosure of Fannie’s and Freddie’s debt would have allowed the SEC to monitor their business and ensure that these “government-sponsored enterprises,” which were exempt from federal taxes, and had a line of credit with the U.S. Treasury, did not overextend themselves.

Johnson opposed the proposal in a letter to House Financial Services Committee Chairman Rep. Ed Markey (D-Mass.), saying that “exemption from registration requirements” was “embodied in our Charter” and was “an integral element of our capacity to provide continuous liquidity to the secondary-mortgage market.” Congressional Democrats succeeded in halting the measure.

>snip

Johnson told a 1995 conference of mortgage lenders in Chicago that credit-scoring was “a vehicle to do more, not an excuse to do less.”

>snip

“We abhor the use of credit scoring as a way to deny housing finance to those people who need help the most,” Johnson said. “We won’t put mechanical systems and arbitrary numbers above our faith in your [local lenders’] judgment and we won’t go back and second guess loans you’ve already made…if they don’t match up to a new way of assessing risks or doing business.”