Washington's $7 Million Man
Chatterbox was shocked upon reading Lloyd Grove's recent Washington
Post profile of James Johnson. Johnson is the former Mondale aide who runs
Fannie Mae, the "government sponsored enterprise" that buys mortgages, packages
them into large blocks and resells them as "mortgage-backed securities." What
was so shocking? Chatterbox already knew Fannie Mae was one of the last great
Washington rackets--a place where ordinary, competent, well-connected politicos
and lawyers get to earn astronomical, Gordon Gekko-like sums (Johnson made an
estimated $7.2 million in 1996) while working to preserve the government favors
that help this ostensibly private, for-profit enterprise earn $3 billion or so
a year. If somebody had to win the Fannie Mae jackpot, it might as well be
Johnson, who--Chatterbox's friends attest--is a decent man.
No, what startled were Johnson's other jobs: in addition to running
Fannie Mae, he is also chairman of the Kennedy Center, Washington's Big Culture
box, and the Brookings Institution, Washington's leading
liberal/centrist think tank. Suddenly, this bland, bespectacled
Norwegian-American has emerged, in the words of ex-colleague Harold Ickes, as
"the chairman of the universe." OK, that may be overstatement (Ickes is also
the man who calls Kenneth Starr's judicially-supervised subpoenas "Gestapo
police state tactics"). But Johnson is Washington's equivalent of
Michael Eisner, a self-promoting power-nerd who protects his insidiously
synergistic empire by buying off potential critics with well-publicized good
works.
Grove's profile wasn't that nasty (after its publication, Johnson sent an
appreciative don't-worry-I'm-not-mad note to Post matriarch Katharine
Graham). But the piece contained the essential anti-Johnson charge--that "he
wields his considerable clout mainly to protect and defend Fannie Mae's
congressionally mandated business advantages." What advantages? First, Fannie
Mae pays no state or local taxes, depriving the needy District of Columbia of
perhaps hundreds of millions of dollars. Second, various federal laws imply
that Fannie Mae's securities are backed by the U.S. government. This lets
Fannie Mae raise money at interest rates lower than its private competitors
must pay. The Congressional Budget Office estimates the value of these special
breaks at $4 billion a year, of which about a third goes to Fannie Mae
shareholders and executives. (See Matthew Cooper's
Slate
analysis, which Johnson appreciatively called "unbelievable
trash.")
If Johnson can keep Congress from ending this $4 billion perk, he's more
than earned his fantastic paycheck. Mainly, he uses traditional methods--
making campaign contributions, opening Fannie Mae offices in key districts.
There's also the Fannie Mae Foundation, which curries favor by handing out
checks to neighborhood groups. (Chatterbox himself once managed to cadge a
speaking fee arranged by this wonderful organization.) Johnson's Kennedy Center
chairmanship is another weapon in his PR arsenal. It's pathetically easy to
play on Washington's cultural pretensions--"We're a sophisticated city like New
York, aren't we? Aren't we?"--something lawyer-lobbyist Abe Fortas discovered
when he managed to distract attention from his corruption by playing classical
violin in public. By cosponsoring free Kennedy Center concerts with the
Washington Post, Fannie Mae purchases the goodwill of an insecure city
and simultaneously cozies up to a journalistic institution that could do it a
lot of damage. (Can you imagine the Post sponsoring a concert series
with a less respectable subsidy-hound like Archer Daniels Midland's Dwayne
Andreas? Chatterbox can't.)
But it's Johnson's Brookings connection that really rankles. For decades,
Brookings has been the liberal institution you could count on to defend
government enterprises when they need to be defended, and criticize subsidies
when they're unjustified. In essence, Brookings scholars exist to expose
rackets like Fannie Mae. But now the head of Fannie Mae is the most prominent
public face of Brookings. Yesterday, Chatterbox drove by the Brookings building
and picked up the latest issue of the Brookings Review . There on page 3
is a large smiling photo of James Johnson, impeccably tailored, offering a
banal Eisner-like introduction to the issue.
To test the chilling effect of Johnson's stewardship, and to generally make
trouble, Chatterbox called up six Brookings scholars, several of whom have been
quite courageous in the past, and asked them what they thought of Fannie Mae's
special deal. Of the six, four chickened out. Two did not. Economist Barry
Bosworth said that while Fannie Mae was a "good, hard-charging" corporation, it
should be "fully-taxed," and an "equalization tax" should be levied on its
borrowing to offset the effect of the implicit federal guarantee. Economist
Henry Aaron said "I don't see any reason why a corporation traded on the New
York Stock Exchange ... should be given advantages by state and local
governments who have to collect more in taxes from Plain Joes to compensate for
the concession." Spoken like true Brookings scholars! The Chatterbox Medal for
courage in policy analysis to you both!
Memo to Jim Johnson: These Brookings wonks want to take away your $4
billion meal ticket! Obviously they fail to understand Fannie Mae's role as a
"catalyst for community development." Don't you want to squash them like bugs?
Or better yet, get back at them in some quiet, vicious Minnesota-like way?
P.S.: Isn't your new Eisner-like profile a potential liability? Fannie Mae
has always preserved its lucrative privileges in part because it's a pretty
obscure agency. Now you present a big, juicy public target. What if some
Republican presidential candidate looking for an issue--John Kasich,
say--portrayed you, the $7 Million Man, as the embodiment of everything wrong
with Washington? Just a thought.
