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Who is the bigger issue, Rick Davis or Jim Johnson?
posted at 11:20 am on September 25, 2008 by Ed Morrissey
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I have to profess amusement at the media and the Barack Obama campaign in attempting to make an issue out of Rick Davis, one of John McCain’s advisers on the presidential campaign. Obama has been trying to cast McCain as a tool of lobbyists, and Davis has become Exhibit A over the last few days. At issue is whether Davis’ firm has taken lobbying money from Fannie Mae and Freddie Mac over the last two years while Davis works for McCain, and whether Davis profits from the business. This began with a New York Times report on Sunday:

Incensed by the advertisements, several current and former executives of the companies came forward to discuss the role that Rick Davis, Mr. McCain’s campaign manager and longtime adviser, played in helping Fannie Mae and Freddie Mac beat back regulatory challenges when he served as president of their advocacy group, the Homeownership Alliance, formed in the summer of 2000. Some who came forward were Democrats, but Republicans, speaking on the condition of anonymity, confirmed their descriptions.

“The value that he brought to the relationship was the closeness to Senator McCain and the possibility that Senator McCain was going to run for president again,” said Robert McCarson, a former spokesman for Fannie Mae, who said that while he worked there from 2000 to 2002, Fannie Mae and Freddie Mac together paid Mr. Davis’s firm $35,000 a month. Mr. Davis “didn’t really do anything,” Mr. McCarson, a Democrat, said.

Shortly after that, allegations that Davis continued to profit from Fannie Mae connections into this year arose, prompting the McCain campaign to issue a sharp rejoinder:

Today the New York Times launched its latest attack on this campaign in its capacity as an Obama advocacy organization. Let us be clear about what this story alleges: The New York Times charges that McCain-Palin 2008 campaign manager Rick Davis was paid by Freddie Mac until last month, contrary to previous reporting, as well as statements by this campaign and by Mr. Davis himself.

In fact, the allegation is demonstrably false. As has been previously reported, Mr. Davis separated from his consulting firm, Davis Manafort, in 2006. As has been previously reported, Mr. Davis has seen no income from Davis Manafort since 2006. Zero. Mr. Davis has received no salary or compensation since 2006. Mr. Davis has received no profit or partner distributions from that firm on any basis — weekly, bi-weekly, monthly, bi-monthly, quarterly, semi-annual or annual — since 2006. Again, zero. Neither has Mr. Davis received any equity in the firm based on profits derived since his financial separation from Davis Manafort in 2006.

Further, and missing from the Times’ reporting, Mr. Davis has never — never — been a lobbyist for either Fannie Mae or Freddie Mac. Mr. Davis has not served as a registered lobbyist since 2005.

Though these facts are a matter of public record, the New York Times, in what can only be explained as a willful disregard of the truth, failed to research this story or present any semblance of a fairminded treatment of the facts closely at hand. The paper did manage to report one interesting but irrelevant fact: Mr. Davis did participate in a roundtable discussion on the political scene with…Paul Begala.

Well, let’s just say for the sake of argument that all of the allegations were true (they’re not), and that Davis continued to profit from his partners’ work with Fannie Mae and/or Freddie Mac. How exactly does this make Davis a villain? There is nothing illegal about lobbying, and Congress never bothered to block Fannie or Freddie from availing themselves of lobbyists. They had the authority to do so, as they demonstrated this summer after bailing both GSEs out.

And who got most of the attention from Fannie and Freddie? It wasn’t John McCain, who averaged $1,000 per year in contributions from Fannie/Freddie sources over the past two decades. Chris Dodd, the chair of the Banking Commitee, averaged $8,000 a year in contributions from those same sources. Barack Obama, though, set records. In less than four years in the Senate, he received more than $120,000 from Fannie/Freddie sources, at a rate of over $30,000 per year.

In 2006, McCain tried to move legislation with Chuck Hagel, John Sununu, and Elizabeth Dole — all Republicans — to bring tighter regulation and more oversight on Fannie and Freddie. Barack Obama and Chris Dodd took their money and did nothing to support that effort. Regardless of whether McCain relies on Rick Davis or not, Fannie and Freddie knew who their friends were, and made sure they invested in them.

Team Obama wants people to think Rick Davis is the villain of the Fannie/Freddie failure because he worked at a firm that did lobbying for them. Meanwhile, Jim Johnson busies himself working for Barack Obama and giving seminars on the lending industry:

Former Fannie Mae chairman Jim Johnson was dumped from Obama’s vice presidential search team, but he’s still playing a behind-the-scenes role on the campaign.

Former Senator Tom Daschle, a top Obama backer, emailed a select list this afternoon that he and Johnson would be leading a briefing intended largely for Clinton’s campaign brain trust next month.

“Jim Johnson and I have scheduled another informal breakfast discussion and update on the campaign early next month,” he wrote to a list including Senator John Kerry, James Carville, and Richard Holbrooke, as well as Clinton’s former top campaign aides, including Howard Wolfson, Geoff Garin, and Harold Ickes.

Who is Jim Johnson? He’s one of the people behind its fraudulent business practices, as auditors discovered:

[Fannie Mae] failed to disclose to OFHEO in a timely manner a post-employment agreement with former CEO James Johnson that provided him with substantial compensation in addition to that already provided upon his termination as a Fannie Mae employee….

Shortly after the release of the September 2004 OFHEO report, an article in the December 23, 2004, Washington Post entitled “High Pay at Fannie Mae for the Well-Connected,” suggested that 1998 compensation for former Fannie Mae CEO James Johnson “was [reported to be] $6 million to $7 million a year,” in 1998. The total compensation in 1998 for Mr. Johnson was, in fact, substantially more.

An initial review of the 1999 Fannie Mae Proxy Statement “Summary Compensation Table” suggests the source of the Washington Post figure on 1998 compensation for Mr. Johnson. A close read of that proxy, including footnotes, shows that the Table itself listed only a small portion of the actual 1998 long-term compensation of Mr. Johnson. Mr. Johnson used a program available to only very senior Fannie Mae executives (Executive Vice President and above) to defer a sizable amount of earned Performance Share Plan shares. Fannie Mae disclosed in a footnote to the Summary Compensation table that Mr. Johnson deferred 111,623 shares; the actual value of the shares did not show up in the Summary Compensation Table.

Fannie Mae disclosed his compensation at the time as $2 million. The actual value of his compensation? Twenty-one million dollars. Why did Johnson and Fannie Mae hide that cost from its shareholders and government auditors? Nor was this his only peccadillo. As it turns out, while CEO of Fannie Mae, he took sweetheart loans from Countrywide Mortgage under a “friends of Angelo” program initiated by Countrywide CEO Angelo Mozilo:

These borrowers, known internally as “friends of Angelo” or FoA, include two former CEOs of Fannie Mae, the biggest buyer of Countrywide’s mortgages, say people familiar with the matter.

One was James Johnson, a longtime Democratic Party power and an adviser to Sen. Barack Obama’s campaign, who this past week was named to a panel that is vetting running-mate possibilities for the presumed nominee. …

There is nothing illegal about a mortgage firm treating some borrowers better than others. But if Fannie Mae officials received special treatment, that could cause a political problem for the government-sponsored, shareholder-owned company.

Its code of conduct, a spokesman said, “requires the disclosure of potential conflicts of interest and prohibits acceptance of substantial gifts, including loans with preferential terms, from an organization seeking to do business with the company without prior review and approval by the company.” The spokesman said the code has been in effect since the early 1990s.

In other words, Johnson hid his compensation and broke his own rules at Fannie to profit at the expense of oversight. Countrywide was one of the main failure points in the sub-prime market collapse, and Johnson and Fannie Mae should have been watching it closely. He apparently had two million reasons to look the other way.

Now let’s compare Rick Davis, as painted by the media and the Obama campaign, and Jim Johnson. At worst, Davis may have recently and indirectly profited by lobbying performed by partners at his firm that made its value increase — lobbying welcomed by Barack Obama in his short tenure in national office to the tune of $30,000 per year in contributions. On the other hand, we have one of the chief architects of the massive failure in the credit markets, one with a clear record of unethical behavior, still actively giving economic advice to Obama, apparently designed to get Obama through a crisis he never attempted to stop and for which Johnson bears significant responsibility.

Objectively speaking, which of these matters most?

http://hotair.com/archives/2008/09/25/who-is-the-bigger-issue-rick-davis-or-jim-johnson/