POLITICO has a good rundown on newly installed National Security Adviser Tom Donilon’s career, with a detailed examination of his time as a lobbyist for Fannie Mae.
From the story:
One part of Donilon’s résumé that went unmentioned in the Rose Garden Friday — the six years he spent as a top executive of Fannie Mae at the height of the housing boom — made him a problematic choice for any Obama administration job that requires Senate confirmation.
Donilon left the firm as it was mired in an accounting scandal in 2005, three years before Fannie Mae’s spectacular collapse when the mortgage market imploded in 2008. Investigators never accused Donilon of wrongdoing in the accounting scandal, but Fannie ultimately paid $400 million to the federal government to settle charges that the company misstated its earnings from 1998 to 2004. The government sued three top Fannie Mae executives to recover millions in bonuses based on the allegedly falsified reports, but Donilon was not among them.
A former official who led one of the main investigations into Fannie Mae said Friday that Donilon didn’t play a role in the misstatements but tried to pressure lawmakers to derail the probe.
“He was in charge of the lobbyists. … That process involved using the Hill to rein in the regulators,” said Stephen Blumenthal, former acting director of the Office of Federal Housing Enterprise Oversight. “That was always Fannie Mae’s approach. And there’s no question that Congress played a major role in enabling Fannie Mae to escape regulation and avoid increasing their capital, which is what eventually killed the company.”
“I don’t think he was part of the problem, but he wasn’t part of the solution,” Blumenthal said. “Mr. Donilon was not a target of the investigation. … Was he an enabler? Absolutely.”
A 2006 report on the federal “special examination of Fannie Mae” is replete with references to Donilon, who worked at the firm from 1999 to April 2005, first as senior vice president and general counsel, and later as executive vice president for law and policy. The report quotes from a 2004 Donilon e-mail plotting efforts to resist federal regulators’ attempts to force changes in Fannie Mae’s executive structure.
“Do you have any sense of the basis on which the agency believes that it has the authority to mandate practices in this area, hard to believe they have a safety and soundness rationale. … We should speed up our work on the interaction between bank regulators and the SEC … Should we start working with the BRT [the Business Roundtable], Chamber [of Commerce], ABA [American Bankers Association] etc now?” Donilon wrote to a colleague.
The report also describes Donilon as part of a group of Fannie Mae execs who exchanged “scripts” in advance of meetings of Fannie Mae’s nominally independent compensation committee.
Of course, even absent the accounting scandal, any involvement with Fannie Mae is politically precarious for a simpler reason: The firm became insolvent in September 2008 and was taken over by federal regulators. Since that time, the federal government has pumped at least $145 billion into Fannie Mae and cohort Freddie Mac. According to independent estimates, long-term costs of bailing out the two firms could range from $389 billion to $1 trillion, depending on how the real estate market fares.