Jim Johnson, a political operative rewarded with the CEO-ship of Fannie Mae, had to step down from Obama's Vice Presidential selection committee. Reading about this guy, he seems like a prime example of why Fannie Mae should be shut down. This guy spent his life as a pure politician. He is a veteran Democrat. When Mondale ran for president in 1984, Johnson was the chairman of his campaign. Maxine Isaacs, who later became his wife, was the campaign's press secretary. Johnson joined Fannie Mae in 1990 and became its chairman a year later.
Banking is a special business. You need years of experience to understand the particularities of its assets, because its assets have risks that are very peculiar, one is always looking at cohorts, and roll rates, etc. My old boss, Kevin Blakely, once told me a funny story, about how he was asked by a professor to speak to his Money and Banking class. He examined this guy's book, and his syllabus, and thought, this is Money and Banking? Most of it was on the money multiplier, a little about interest rate risk, and nothing about credit risk. I would say current updates that include the Merton Model, are incredibly small baby steps in terms of relevance. To know banking, you need to work there at least 5 years, because you don't learn this in school, or the press.
What does a politician know about residential mortgages given all his experience as a Democratic operative? Nothing, except access to politicians. It's as if they made Newt Gingrich head of NASA. He was clearly valuable merely in maintaining the Fannie Mae's plumb position maintaining its special access to government finance rates. That can be the only reason. And so Fannie Mae became, for decades, a place to reward high-level Washington politicians with million a year jobs. It's a scam. He got rich perpetuating a government-sponsored monopoly that provides high-level patronage jobs.
No comments:
Post a Comment