All the Devils Are Here [30]
The goals themselves, weak to begin with, were easy to game. For Fannie, they were almost beside the point. The real issue for Johnson was that the legislation gave him a huge new rhetorical advantage. His company—by statute—was helping low- and moderate-income Americans achieve the American Dream. The mission made it easy to explain to members of Congress why Fannie mattered. And when critics complained about Fannie, the company could hit back by labeling them “antihomeowner.”
Fannie Mae had always employed people that insiders called housers, a mildly derisive term that referred to those idealists who believed homeownership was the cure to the world’s ills. It wasn’t long before Johnson became a houser, too. At least, he talked the talk. “The mission runs in our veins,” he liked to say. Another of his favorite lines was a twist on the old saying about General Motors: “What’s good for American housing is good for Fannie Mae.” Fannie began advertising its connection to homeownership on shows like Meet the Press.
But Johnson went well beyond mere rhetoric. The GSEs’ core problem, he liked to say, was that there was “nothing in the homeowner’s life called Fannie Mae or Freddie Mac.” Everything the GSEs did was behind the scenes. But for Congress, it was the homeowners who mattered, since they were the constituents. So Fannie had to find a way to demonstrate two key traits, which Johnson called “indispensability” and “tangibility.” That, he’d say, would “allow us to survive.”
Johnson solved this problem by establishing what Fannie Mae called partnership offices. Officially, these were operations dedicated to finding opportunities to purchase mortgages in a given state. Unofficially, they were the grassroots of a highly sophisticated political operation. Fannie’s first partnership office was in San Antonio, which just happened to be home to Representative Henry Gonzalez, then the chairman of the House banking committee. (In 1994, he became the ranking minority member when the Republicans gained majority status in the House.) When Gonzalez retired in 1999, Representative John LaFalsce of Buffalo, New York, became the ranking Democrat. So Fannie opened a partnership office in Buffalo.
There was a certain formula to these offices. They were staffed by someone close to power—the son of a senator, a governor’s assistant, a former congressional staffer. They held ribbon-cutting ceremonies, always with a politician present, to announce, for instance, that Fannie was going to put millions into a senior citizen center. There were as many as two thousand ceremonies a year in partnership offices all over the country. Members of Congress may not have understood how the secondary mortgage market contributed to homeownership, but they certainly understood the dispensation of pork.
Fannie Mae also funneled money to politicians. In addition to campaign contributions, Fannie set up a foundation that made contributions to politically useful causes. The foundation had existed in a small way since 1979, but in 1996 Johnson contributed $350 million of Fannie’s stock and handed over responsibility for advertising to Fannie’s foundation. Over the years, the foundation became one of the largest sources of charitable donations in the country. It made heavy donations to, among others, the nonprofit arms of the Congressional Black Caucus and the Congressional Hispanic Caucus.
Fannie hired key insiders to plum jobs. Tom Donilon, who had been the chief of staff to Secretary of State Warren Christopher, joined Fannie Mae when he left the government; so did Jamie Gorelick, who had been the deputy attorney general in the Clinton administration. Sometimes, when it suited his purposes, Johnson even hired Republicans, such as Arne Christensen, who had been the chief of staff to Newt