[Please refer to Addendum below regarding information published by the Wall Street Journal on June 12, 2008.]
John Dickerson took the bait. As did Josh Gerstein the New York Sun. Both overlooked the disclaimers embedded in the text, and presented somebody else's speculation as demonstrable fact. And suddenly, there is buzz in the Washington press corps that gives Republicans a pretext to argue that Democrats are just as corrupt the GOP.
Here was Dickerson's lead in Monday's Slate:
"Jim Johnson, the man Barack Obama has picked to lead his vice-presidential vetting team, has gotten preferential treatment for personal loans from Countrywide Financial, a company Sen. Obama and others have blamed for helping to create the subprime mortgage mess."
The claim of preferential treatment is based on a June 7, 2008 Wall Street Journal article which says something altogether different:
"A comparison of the Fannie Mae officers' terms with interest rates prevailing when they got their loans raises the possibility Countrywide gave them preferential terms. But it's impossible to tell for sure from public documents. An array of other factors also can account for lower-than-average rates, including a borrower's income, total assets and credit score; how big the loan is compared with the home's value; and how many "points" a borrower may have paid upfront in order to get a lower rate."[Emphasis added.]
Translation for those who lack any financial sophistication: They don't know jack. The numbers themselves bear this out. Johnson obtained three mortgages from Countrywide, each with an initial five-year fixed rate. Here's how the contractual rates compared with the market averages at time, as determined by the Journal:
October 23, 1998: Amount: $393,000; Initial Rate: 6.375%; Market Average: 6.2%. Rate was .175% above market average.
November 8, 2001: Amount: $1,300,000; Initial Rate: 5.250%; Market Average: 6.0%. Rate was .75% below market average.
June 20, 2003: Amount: $972,000; Initial Rate: 3.875%; Market Average: 4.3%. Rate was . 4125% below market average.
So, according to the Journal's analysis, the Johnson received a mortgage that was no more than 75 basis points below the market average for the initial five-year period. Could that difference be explained by points paid up front, the home's appraised value versus the loan value, refinancing penalties or any number of other variables? Absolutely.
James Johnson was the CEO of Fannie Mae, the biggest buyer of Countrywide's mortgages, until December 1998. Consequently, the only mortgage Johnson obtained when there was a potential conflict of interest was a $393,000 mortgage that was 17.5 basis points "above" the market average.
The Journal article is highly misleading in that it places Johnson's tenure at Fannie Mae in a false context:
"Mr. Johnson led Fannie Mae from 1991 to 1998. He and Countrywide's Mr. [Angelo] Mozilo worked together to streamline the underwriting process. Mr. Mozilo told Dow Jones in 1995 that he was 'working very closely ... with Jim Johnson of Fannie Mae to come up with a rational method of making the process more efficient by the use of credit scoring.' Their efforts helped to lead to a boom in mortgage lending that brought huge profits to both companies but is now ending badly."
The recklessness in mortgage lending never really took off until 2003, when mortgage lenders like Countrywide abdicated traditional underwriting standards for documentation, income and asset values. Fannie Mae's exposure to the subprime market has always been a tiny percentage of its portfolio. It is false and misleading to tie the subprime crisis to Fannie Mae's lending policies of the 1990s.
Then the follow-up: On June 9 and June 10, the Journal's Washington Wire echoed the same disparaging insinuations, with "Obama Won't 'Vet the Vetters'."
With the flimsy foundation laid by the Journal's news section, its notorious editorial page went into its familiar smear mode against Johnson and the Obama campaign:
"Mr. Johnson is now vetting vice presidential candidates for Mr. Obama. But he is also a textbook case for poor disclosure as regulators sifted through the wreckage of Fannie's $10 billion accounting scandal. Despite an exhaustive federal inquiry, Mr. Johnson managed to avoid disclosing one very special perk: below-market interest-rate mortgages from Countrywide Financial, arranged by Countrywide CEO Angelo Mozilo."
Again, there was only one mortgage extended while Johnson was at Fannie Mae; it does not appear on its face to have been at below-market rates; and there was no evidence presented to suggest that he avoided disclosure of that single mortgage. Another fatal flaw in that passage is that the Fannie Mae accounting scandal was caused almost entirely by actions that took place beginning in 1999, after Johnson left Fannie Mae.*
The smear campaign had its desired effect. Johnson just announced that he was resigning from the Obama team.
So to recap, here's how the right wing media campaign works:
Step 1: Plant a story based on speculation rather than hard evidence.
Step 2: Rely on sloppy journalists (e.g. John Dickerson) to present the speculation as fact.
Step 3: Use the "factual" premise to argue that Democrats are just as ethically compromised as Republicans.
A year ago, it would never have occurred to me that the initial news story in the Journal was intended as a setup for a larger partisan narrative. But that was then.
Addendum: Updated information changes the story. June 12, 2008 9:30 am This morning the Journal published additional information which does suggest that Johnson may have received special treatment for his real estate loans. Had this information been provided in the initial article published last Saturday, I would never have written this piece because they have now provided evidence suggesting that the transactions were not entirely arms-length. The case that Johnson was involved in anything wrong or inappropriate is still weak, but there is a case that can be made.
The Journal today mentions that Johnson "received more than $5 million in loans from Countrywide that were arranged outside its normal underwriting process, according to loan records and people with knowledge of the transactions."
"Outside the normal underwriting process," is very different from what was written last Saturday:
"Countrywide Financial Corp. makes mortgage loans through a vast network of offices, brokers and call centers. But a few customers have gotten their loans a special way: through Countrywide Chief Executive 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."
What were they saying there? That Johnson's assistant asked Mozilo's assistant to see to it that the loan application was processed quickly? "Getting a loan through the CEO" is so vague it's almost meaningless.
Today the Journal suggests that Johnson's loan applications were processed by Countrywide's CEO or his deputies. That is very different and really is unusual.
"A Democratic power broker who remains a paid consultant to Fannie Mae, Mr. Johnson was a major beneficiary of a Countrywide program known as 'Friends of Angelo,' which arranged loans for friends of Chairman and Chief Executive Angelo Mozilo at attractive rates. ... "In its terms, the Friends of Angelo program resembled a program for Countrywide's own employees that offered slight discounts on prevailing interest rates, several people with knowledge of it said. They said Friends-of-Angelo borrowers typically got interest-rate discounts of around 0.25 to one percentage point."Whether that brought them lower rates than other similarly qualified customers can't be determined for sure, because several variables can affect loan rates. In any case, low rates were only one aspect of the program. Perhaps more significant, insiders said, was that for Friends-of-Angelo customers, Countrywide sometimes overlooked its own rules on debt ratios, down payments and other matters.
"Friends-of-Angelo loans were manually underwritten, avoiding the limits imposed by Countrywide's computer system.
"Within Countrywide, Mr. Johnson was designated both a Friend of Angelo and a 'High Profile Borrower,' according to documents and people familiar with the matter. His loans were handled by Mr. Mozilo and his lieutenants Andrew 'Drew' Gissinger III and Wes Lazear.'"
Bottom Line Is Changed: Until you start digging, you don't know what you will find. It appears as if, subsequent to the publication of their initial article on Saturday, Journal reporters Glenn Simpson and James Hagerty were able to turn up more information to bolster their initial thesis. I do not want to suggest that the Journal's news section had any agenda other than pursuit of a story.
____________
*An important qualifier here: The Fannie Mae accounting scandal involved the manipulation of hedge accounting to smooth out reported earnings. The first time this had a significant impact on reported earnings was in the fourth quarter of 1998, when Johnson was still at Fannie Mae. (He left in December 1998.) In late 1998 collapse of the Russian ruble caused the yield on 10-year Treasuries to fall by over 100 basis points, thereby triggering a wave of mortgage refinancings. Fannie Mae's statistical models estimated that the eventual expense associated with that change would be $400 million. A decision was made to recognize $200 million of the expense in 1998 and $200 million in 1999. Reported income for the year was $3.4 billion. However, disclosure of such an extraordinary item should have been footnoted in the financial statement for full transparency. Those accounting decisions are made following the end of the fiscal year, i.e. in calendar 1999. The bottom line is that Johnson is not 100% exempt from any taint associated with Fannie Mae, but a review of the report by the Office of Federal Housing Enterprise Oversight shows the almost all of the dubious accounting decisions were traceable to actions taken in 1999 onward, by Johnson's successors. The other bottom line, as the right wing knows all too well, is that it is far more difficult to explain away a smear than it is to launch a smear.
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Fox News could not find their ass with 2 hands. Let's face it, it's jokealism now. I watch the "news" for entertainment now. Do I take any of it seriously. Not just no. HELL NO !!!!!!!!!!
Too bad the "addendum" wasn't added until after most of the comments were made....
David adds "...Had this information been provided in the initial article published last Saturday, I would never have written this piece because they have now provided evidence suggesting that the transactions were not entirely arms-length."
In other words, the transactions were not what you or I would get. As far as the MSM sliming anyone, in this case I would suggest that dealing with Mozilo as a "Friend of Angelo" resulted in slime being caught in the face.
This is an excellent example of what is wrong with the media today. Opinions and interpretations are being presented as facts. I don't mind people having an opinion but they should label it as such.
There are just too many readers/viewers out there who still believe that the Media tells the truth.
The MSM has become one big mess of gossip, inuendo and opinions and interpretations. Whatever happened to real journalism?
This is how the right-wing Echo Chamber operates.
They have had a lot a time to fine-tune it, and condition their viewers/listeners to have Pavlovian responses to it.
The only way to fight it is to shine the bright light of TRUTH on it, and then watch the cockroaches scurry for the darkness.
This is an outstanding example of excellent journalism. I hope it doesn't stop here.
The problems withthe market are the worst for lst time buyers who need a downpayment beyond what the average American can attain in irder to to get ia proverbial foot n the door, as opposed to a few years back, when it didn't take much.
Hey, we need to understand that if it was a progressive, all is ok. If is was a neocon, they had to lie. Its in their blood. We never hold our own to ethics and honesty. They have to be ethical and honest or they would not be progressive. Thats what I understand from reading all the posts!
We have to understand how these slimes use the MSM: case in point the selling of the Iraq War.
1. The neocons planted the idea of Saddam with WMD and buddies with AlQueda.
2. Then Judith Miller, working in concert with the neocons, printed her lies in the New York Times and the NYT let her lies stand and published them on their front page. Big Scoop !!
3. Then Cheney/ Rice and others fanned out on all the Sunday talk shows, using the NYT as"God's Truth" about the lies in the NYT
4. Mission Accomplished!
5. All these lies will continue with a complacant news media. It is just starting !! That was how J. Johnson was undone. Exactly the same !!
Thank you David, for exposing the lies and venom and for the work you do in highlighting the TRUTH. Sad to say, most of our media has been alienated from that word. But good will always overcome evil even though the battle may be long. Good will conquer in the end.
So, if it's so wrong, why didn't Obama try to fight it? Why did he roll and try to distance himself from this guy? He's setting up a disturbing pattern of trying to distance himself from people, leaving the uncomplimentary impression that he's not too swift in his choice of associate, viz Reverend Wright. I'm a supporter of Obama, but the impression left by this is not good.
In entertainment they say that any news is good news. That isn't true of politics. Bad press is bad press.
When did Obama roll on this man? He did defend him in the news conference I saw on the subject. It is not even clear this man did anything wrong,so why is Obama's judgement so flawed? Is John Kerry's judgement flawed as well? I believe he vetted Kerry's VP choices.
Rev.Wright? The good Reverend very publicly distanced himself from Obama. It was only after this man made it clear he no longer wanted a relationship with Obama,that he finally had to separate himself from him.
Obama is not all seeing,or all knowing,but this seems to be tempest in a teapot.This man was a volunteer,not a lobbyist,or someone who advises on policy. It seems to me you are awfully quick to buy into anything put out by the MSM.
Cornflower, with all due respect, how can you expect Obama to deal with everything immediately? He's only one man and he himself has admitted he's not perfect. Now I know he has lots of people working for him but while they investigate and try to get the facts, he has to do what he thinks is best to protect the image of the party. With "Obama trying to fight it" do you know other things would be going sour. You and I don't know the half of what he has to deal with on a daily basis. Not everything make the news, you know. We just have to pray for him. God bless you, God bless everyone, God bless America and God bless President Obama.
You know what, he could start by not hiring the friends of Countrywide's CEO. The same man Obama has called out by name in the primaries. Basically, its that simple to me. This one, while not too big a deal in my mind, was obvious. The problem with it is that now Barack has lost some of the high ground on his lobbyist/ corporate charges against McCain by opening up claims of hypocrisy from the Repub camp. This one will go away almost un-noticed by the voters, but he can't have too many more of these.
Not McCain Writes:
"Why can't the MSM cover this? Too complicated for their brains to process? You laid it all out very clearly."
Exactly. The MSM, at the hands of corrupt manipulators for power like Rupert Murdoch, have billions invested in making the public stupid, and now they're cashing it in to the best of their ability because they're so frustrated they can't pin anything else on Obama. They don't think we can handle this with our, or their, short- attention spans.
We need to understand that the Power elite that the WSJ and Murdoch represents are scared to death, because they stand to lose not only billions, but a tremendously large amount of power that has been obtained for them by Bush, Cheny and the Neocon "Shock" introduced by this administration.
They will continue to do everything; turn every stone to find a foothold, and it will get a lot creepier then this. We have to keep blogging, and hold our intelligence levels high for ourselves and everyone else we can.
Great post indeed, thanks.
Republicans have known for years that the more education you have, the more likely you are to vote democratic. They pay lip service to education in order to win elections, but then do everything in their power to curtail it.
Case in point: Charter Schools and School Vouchers. Presented as a way to provide "freedom of choice" and "foster heathy competition", the real goal is to siphon money and resources away from public education, and ultimately to splinter our education system.
The real reason republicans are constantly on the lookout for new existential enemies is to distract us from the fact that THEY are our true enemies.
AS A PERSON THAT BUYS and SELL'S Real Estate I CLEARLY UNDERSTAND THE SLIME SLEEZEY Games The RIGHT WING NUT Hacks are trying to play!!
THAT NEWS PAPER IS STRAIGHT PROPAGANDA TRASH / GARBAGE!!
RUPERT MURDOCH, THE SAME MAN THAT OWN FOX NOISE / FIX NEWS, Replacing Ethical Journalistic Standards with PROPAGANDA GOSSIP, FEAR and HATE MONGERING!!
THEY ARE THE WORST!!!!!
Great post. Why can't the MSM cover this? Too complicated for their brains to process? You laid it all out very clearly.
On the "playing politics" front, this is worth quoting, "A year ago, it would never have occurred to me that the initial news story in the Journal was intended as a setup for a larger partisan narrative."
We're going to see a lot of this kind of "(hit)teamwork" in the next 5 months. I hope Obama will be better prepared for it--and have a crisp, clean soundbite-rebuttal, for it.
Wasn't this Daschle's job, to respond to attacks with facts and counter-strikes? He failed miserably during the primary with this and seems completely unprepared now, as well.
Let's get with it! These kind of smears can't POSSIBLY still be a surprise.
Obama/Clark '08
So when is Charlie Black, McCain's campaign manager steeping down. He's Mr. K. Street! So who here has never gotten a hook up?
Rupert Murdoch after buying WSJ: "The Wall Street Journal won't change a bit."
He's right - it hasn't changed a bit. They've had a partisan agenda for decades. Go back and read some of the garbage they wrote during all the Clinton scandals.
Yeah right.
Obama should just say (if not already) the bit about RM owning the WSJ and then can have a teachable moment about perhaps changing the rules that facilitated media consolidation and how it makes CRAPPY journalism. We'll see if he does and if the MSM has the balls to cover it on their news programs. Sadly probably not.
EXACTLY!!
THAT NEWS PAPER IS STRAIGHT PROPAGANDA TRASH / GARBAGE!!
RUPERT MURDOCH, THE SAME MAN THAT OWN FOX NOISE / FIX NEWS, Replacing Ethical Journalistic Standards with PROPAGANDA GOSSIP, FEAR and HATE MONGERING!!
THEY ARE THE WORST!!!!!
Does anyone know whether "Change" means that ex-policitians will no longer get rich after leaving their government jobs?
Is this meant to be an attack on Obama? Do you even vote?
This is why we need to have a civics test for voter eligibility.
Actually, Bush and Cheney and Rice and the other Oil Cabinet Members HAVE made BILLIONS WHILE IN THEIR GIVERNMENT JOBS!!!!!!
I think we need to email the link to this story on blogs and some friendly journalists like Olbermann and try to get the word out that this man was unfairly smeared and tarred. We cannot let any right wing attack go unpunished this summer.
Especially with Lobbyists infest my campaign McShame who was agitating all day about this and slamming Obama.
We need to strike back hard and fast.
I had a feeling there was something up with this.
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Posted June 11, 2008 | 05:03 PM (EST)