Research Briefing

Tom Donilon Made Millions Battling Oversight Of Fannie Mae, Suppressed Probe Into “Accounting Irregularities”

“Donilon Was Also Executive Vice President For Law And Policy At Fannie Mae (2000-2005) During Investigations Into Accounting Irregularities At The Mortgage Giant And Was Accused Of Overseeing A Lobbying Campaign Against Those Investigations In A Scathing Government Report.” (Diana Olick, “Former Fannie Mae Exec As White House Chief Of Staff?” CNBC, 9/24/10)

DONILON FOUGHT GOVERNMENT ACCOUNTING PROBE INTO FANNIE MAE, WHICH LED TO $400 MILLION SEC SETTLEMENT

“A Longtime Democratic Operative, Donilon For Six Years Beginning In 1999 Was A Registered Lobbyist And Top Executive At Fannie Mae, Leaving In 2005. His Tenure Coincided With Efforts In Congress To Rein In The Mortgage Giant With Tougher Regulations And Greater Oversight.” (Pete Yost, “On Housing, Donilon At Center Of Regulatory Fight,” The Associated Press, 10/9/10)

“Donilon Oversaw A Major Lobbying Campaign Against The Accounting Probe By Fannie Mae.” “An early report claimed Fannie was using reserves to improve its earnings. A May 2006 ‘Report of the Special Examination of Fannie Mae' by OFHEO says Donilon oversaw a major lobbying campaign against the accounting probe by Fannie Mae. Donilon was not accused of participating in the accounting issues, which ultimately led to a $400 million settlement with the Securities and Exchange Commission in 2006 (Fannie Mae did not admit any improprieties).” (Diana Olick, “Former Fannie Mae Exec As White House Chief Of Staff?” CNBC, 9/24/10)

• Donilon’s Work Was Described By Democrat Operatives As Being “The Head Of An Unceasing Anti-Regulatory Campaign.” “Donilon designed and implemented Fannie Mae's public affairs strategy, which included Capitol Hill and anything that might affect opinion there, said one of the two people, a former Democratic Party official who spoke on condition of anonymity in order to be able to speak candidly. The second person, a former housing industry executive intimately familiar with of Fannie Mae's operations, agreed that Donilon was at the head of an unceasing anti-regulatory campaign that the company waged throughout his tenure.” (Pete Yost, “On Housing, Donilon At Center Of Regulatory Fight,” The Associated Press, 10/9/10)

Donilon “Was In Charge Of The Lobbyists, And “An Enabler” That Helped “Fannie Mae Escape Regulation And Avoid Increasing Their Capital.” “’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.’ (Josh Gerstein, “Donilon’s Resume: Policy, Law And Fannie Mae,” Politico, 10/08/10)

• “Lobbyists Under Donilon’s Charge Fought The OFHEO Investigation And Even Tried To Counter, Pushing An Investigation Into OFHEO.” “The report is very long and full of instances that show lobbyists under Donilon's charge fought the OFHEO investigation and even tried to counter, pushing an investigation into OFHEO. The report also cites a 2003 email from then COO (and later CEO) Daniel Mudd to Donilon, exposing what OFHEO calls ‘efforts to generate interagency conflict.’" (Diana Olick, “Former Fannie Mae Exec As White House Chief Of Staff?” CNBC, 9/24/10)
• “Others Have A Different View Of Donilon's Agenda, Suggesting That Donilon Wanted To Preserve The Mortgage Giant's Empire And Head Off Any Attempt By Congress To Lessen Fannie Mae's Huge Footprint On The Mortgage Market.” (Pete Yost, “On Housing, Donilon At Center Of Regulatory Fight,” The Associated Press, 10/9/10)

The Government Report Highlighted The “Special Relationship” Between Fannie Mae Lobbyists And Congressional Staff, Using “Their Longstanding Relationships…To Interfere With OFHEO’s Special Examination.” “But according to the OFHEO report: ‘Fannie Mae's Government and Industry Relations Department had a special relationship of cooperation and support with select Congressional staff. In the spring and again in the fall of 2004, Enterprise lobbyists, with the knowledge and support of senior management, used their longstanding relationships with Congressional staff to attempt to interfere with OFHEO's special examination.’" (Diana Olick, “Former Fannie Mae Exec As White House Chief Of Staff?” CNBC, 9/24/10)

• Questions Exist As To The “Details Of His Work At Fannie Mae” And His Efforts To Enlist “Democratic Lawmakers In An Attempt To Fend Off” Fannie Mae’s Regulators. “Naming Donilon to a top State Department position would have opened him up to questioning from Republicans about the details of his work at Fannie Mae, including his efforts to enlist Democratic lawmakers in the attempt to fend off regulators. (Josh Gerstein, “Donilon’s Resume: Policy, Law And Fannie Mae,” Politico, 10/08/10)

The Government Report “Is Replete With References To Donilon” And Quotes A “Donilon E-Mail Plotting Efforts To Resist Federal Regulators’ Attempts To Force Changes” In Fannie Mae. “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.” (Josh Gerstein, “Donilon’s Resume: Policy, Law And Fannie Mae,” Politico, 10/08/10)

• Donilon’s Email Argued That They “Should Speed Up Our Work” With Regulators And Start Coordinating With Other Lobbying Groups.” “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.” (Josh Gerstein, “Donilon’s Resume: Policy, Law And Fannie Mae,” Politico, 10/08/10)

DONILON WAS RICHLY COMPENSATED BY FANNIE MAE

Donilon Received “More Than $10 Million In Salary, Bonuses And Stock Option” Just Between 2001 and 2004. “Lawmakers would surely have raked him over the coals about the more than $10 million in salary, bonuses and stock options the firm reported paying him just between 2001 and 2004.” (Josh Gerstein, “Donilon’s Resume: Policy, Law And Fannie Mae,” Politico, 10/08/10)

Donilon Was “Part Of A Group Of Fannie Mae Execs” Who “Exchanged ‘Scripts’” Before Meetings Of “Independent Compensation Committee.” “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.”  (Josh Gerstein, “Donilon’s Resume: Policy, Law And Fannie Mae,” Politico, 10/08/10)

He Has Been Described As “A Rich Pick” Given His Longtime Ties To “Fannie Mae During The Housing Bubble” And Obama’s Anti-Lobbyist Stance. “Given Obama’s talk about ‘exclud[ing] lobbyists from policymaking jobs,’ and stopping the revolving door between the executive branch and K Street, Donilon would be a rich pick. He was a top lobbyist at Fannie Mae during the housing bubble, when Fannie fought — with Democratic help — to avoid any restrictions or curbs on its work to inflate home values and get more people under mortgage. Before that, Donilon was a lobbyist at O’Melveny and Myers, where Fannie was a client.” (Timothy Carney, “Rahm’s Replacement?: A Fannie Mae Lobbyist In The Pay Of Goldman,” The Washington Examiner, 9/8/10)

And He Reported That “In 2008, According To His Financial Disclosure Forms, Donilon Was A Paid Consultant For Citigroup, Goldman Sachs, And Apollo Investments.” (Timothy Carney, “Rahm’s Replacement?: A Fannie Mae Lobbyist In The Pay Of Goldman,” The Washington Examiner, 9/8/10)

IN OBAMA’S ADMIN, WHY IS WORKING AT FANNIE MAE A PREREQUISITE TO A SENIOR FOREIGN POLICY JOB?

Donilon’s Elevation To NSA, Raises Questions About The “Perception Involved In Having A Former Top Fannie Official In Such A High Profile Position In The West Wing.” “Now he's up for a job that would put him right in the center of White House policy-making, and vital discussions and decisions relating to the future of housing finance. ‘Given that the disposition of Fannie and Freddie will be a top issue leading into the 2012 election, the White House will need to consider the perception involved in having a former top Fannie official in such a high profile position in the West Wing,’ says and industry insider.” (Diana Olick, “Former Fannie Mae Exec As White House Chief Of Staff?” CNBC, 9/24/10)

• Ten Reasons To Be Worried About Donilon: Number Nine: Donilon Is A Former Lobbyist. “Four weeks before the mid-terms and Barack Obama fires General Jim Jones as National Security Adviser and appoints Tom Donilon in his place. So what on earth is going on and what does this mean? Here are 10 reasons to be worried: …  9. Donilon is a former lobbyist. Remember how Obama was going to change how Washington worked and rid the city of lobbyists? Well now his top foreign policy adviser is a former lobbyist for Fannie Mae who consulted for Goldman Sachs. 10. The Obama administration is unravelling. Republicans can gloat about this but it is bad news for Americans and the world that Obama has lost several top economic aides, his chief of staff and now his top foreign policy adviser BEFORE the mid-term elections. It shows a degree of crisis and disarray that cannot be good in policy terms.” (Toby Harnden, “10 Reasons To Be Worried As Tom Donilon, Afghan War Sceptic & Desk-Bound Foe Of US Military, Gets Top Foreign Policy Job,” The Telegraph (UK) 10/8/10)

Last Week, Obama Nominated Thomas Nides “A Longtime Democratic Operative” Who Served As A Senior Fannie Official With Donilon To Deputy Secretary Of State. “However, a longtime Democratic operative who served in the senior ranks at Fannie with Donilon, Thomas Nides, was nominated last week as deputy secretary of State for management. Nides, who was a senior vice president for human resources, and later administration, is mentioned less frequently in the investigative reports. However, the reports show he worked on the same compensation-related ‘scripts’ Donilon handled.” (Josh Gerstein, “Donilon’s Resume: Policy, Law And Fannie Mae,” Politico, 10/08/10)

Though Obama’s Reliance On Fannie Mae Execs Started During His Presidential Campaign When Obama “Picked Former Fannie Mae CEO Jim Johnson To Lead His Vice Presidential Search.” “The Obama team’s tolerance for Fannie Mae veterans has always been murky. During the 2008 campaign, Obama picked former Fannie Mae CEO Jim Johnson to lead his vice presidential search but dumped Johnson after his ties to the worsening mortgage crisis made him radioactive. A well-connected Washington lawyer who served for several years as the firm’s vice chairman, Jamie Gorelick, has never surfaced as a serious contender for an Obama administration post despite her service as deputy attorney general during the Clinton administration and as co-chair of the 9/11 Commission.” (Josh Gerstein, “Donilon’s Resume: Policy, Law And Fannie Mae,” Politico, 10/08/10)