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A Project of The Annenberg Public Policy Center

Obama’s ‘Economic Advisers’

Q: Are three former Fannie Mae executives "economic advisers" to Obama?

A: No, claims made in a chain e-mail are false. Jim Johnson advised on non-economic matters but quit after a week. Franklin Raines says he took a "couple of calls" but was never an adviser. We find no evidence Tim Howard ever had a connection to the Obama campaign.


Is this true?

Here is a quick look into 3 former Fannie Mae executives who have brought down Wall Street.

Franklin Raines was a Chairman and Chief Executive Officer at Fannie Mae. Raines was forced to retire from his position with Fannie Mae when auditing discovered severe irregularities in Fannie Mae’s accounting activities. At the time of his departure The Wall Street Journal noted, "Raines, who long defended the company’s accounting despite mounting evidence that it wasn’t proper, issued a statement late Tuesday conceding that "mistakes were made" and saying he would assume responsibility as he had earlier promised. News reports indicate the company was under growing pres sure from regulators to shake up its management in the wake of findings that the company’s books ran afoul of generally accepted accounting principles for four years." Fannie Mae had to reduce its surplus by $9 billion.

Raines left with a "golden parachute valued at $240 Million inbenefits. The Government filed suit against Raines when the depth of the accounting scandal became clear. http://housingdoom.com/2006/12/18/fannie-charges/.

The Government noted, "The 101 charges reveal how the individuals improperly manipulated earnings to maximize their bonuses, while knowingly neglecting accounting systems and internal controls, misapplying over twenty accounting principles and misleading the regulator and the public. The Notice explains how they submitted six years of misleading and inaccurate accounting statements and inaccurate capital reports that enabled them to grow Fannie Mae in an unsafe and unsound manner."

These charges were made in 2006. The Court ordered Raines to return $50 Million Dollars he received in bonuses based on the miss-stated Fannie Mae profits. Net windfall . . . $190 million!

Tim Howard – Was the Chief Financial Officer of Fannie Mae. Howard "was a strong internal proponent of using accounting strategies that would ensure a "stable pattern of earnings" at Fannie. In everyday English – he was cooking the books. The Government Investigation determined that, "Chief Financial Officer, Tim Howard, failed to provide adequate oversight to key control and reporting functions within Fannie Mae,"

On June 16, 2006, Rep. Richard Baker, R-La., asked the JusticeDepartment to investigate his allegations that two former Fannie Mae executives lied to Congress in October 2004 when they denied manipulating the mortgage-finance giant’s income statement to achieve management pay bonuses. Investigations by federal regulators and the company’s board of directors since concluded that management did manipulate 1998 earnings to trigger bonuses. Raines and Howard resigned under pressure in late 2004. Howard’s Golden Parachute was estimated at $20 Million!

Jim Johnson – A former executive at Lehman Brothers and who was later forced from his position as Fannie Mae CEO. A look at the Office of Federal Housing Enterprise Oversight’s May 2006 report on mismanagement and corruption inside Fannie Mae, and you’ll see some interesting things about Johnson. Investigators found that Fannie Mae had hidden a substantial amount of Johnson’s 1998 compensation from the public, reporting that it was between $6 million and $7 million when it fact it was $21 million."

Johnson is currently under investigation for taking illegal loans from Countrywide while serving as CEO of Fannie Mae. Johnson’s Golden Parachute was estimated at $28 Million.


FRANKLIN RAINES? Raines works for the Obama Campaign as Chief Economic Advisor

TIM HOWARD? Howard is also a Chief Economic Advisor to Obama

JIM JOHNSON? Johnson hired as a Senior Obama Finance Advisor and was selected to run Obama’s Vice Presidential Search Committee IF OBAMA PLANS ON CLEANING UP THE MESS – HIS ADVISORS HAVE THE EXPERTISE – THEY MADE THE MESS IN THE FIRST PLACE.

Would you trust the men who tore Wall Street down to build the New Wall Street ?


According to yet another false e-mail making the rounds on the Internet, Franklin Raines and J. Timothy Howard are chief "economic" and "finance" advisers to the presidential campaign of Sen. Barack Obama. Not true. Neither man works for the Obama campaign, either now or in the past. The e-mail is technically accurate when it says Obama selected Jim Johnson to head his vice presidential search committee, but it fails to mention that Johnson lasted only a week in that unpaid position.

It’s true that all three men were at one time top executives of the Federal National Mortgage Association, the huge company known as "Fannie Mae," which was set up by Congress to supply money for home mortgages. But it’s a huge stretch to conclude, as this e-mail does, that these three men "brought down Wall Street." The message is mostlyaccurate in its description of the roles Raines and Howard played in an accounting scandal from several years ago, though we weren’t able to verify the exact value of each man’s "golden parachute." However, charges against Raines were dropped this year in exchange for his giving up $24.7 million in stocks, cash and other benefits. The settlement included a $2 million payment to the federal government to be covered by Fannie Mae’s insurance policy. Howard also agreed to a settlement valued at $6.4 million, including $5.2 million in stock options. The e-mail also notes that Johnson, who was CEO before Raines, was criticized for receiving $21 million in compensation a decade ago.

Obama’s Connection to Raines
We addressed Raines’ connection to Obama on the FactCheck Wireback in September after a McCain-Palin campaign ad claimed that Raines, the former Fannie Mae chairman and CEO, was advising Obama on economic matters. Both Raines and the Obama campaign denied that Raines was, or is currently, working for the campaign as an adviser. And the Washington Post’s Michael Dobbs, who writes the Fact Checker column, found that the connection between the two was being exaggerated. This e-mail exaggerates the relationship even further, claiming that Raines is a "chief economic advisor," which is utterly false.
This false claim rests on misinterpretation of a Washington Post profile of Raines by reporter Anita Huslin. In the article, Huslin – apparently quoting Raines – said he had “taken calls from Barack Obama’s presidential campaign seeking his advice on mortgage and housing policy matters.” When Dobbs questioned Huslin about what Raines had told her, she said that Raines said "he had gotten a couple of calls from the Obama campaign." Huslin added, "I asked him about what, and he said ‘oh, general housing, economy issues.’ (’Not mortgage/foreclosure meltdown or Fannie-specific,’ I asked, and he said ‘no.’)”
After the McCain campaign released the ad linking the two, Rainesissued a statement through the Obama campaign saying, “I am not an advisor to Barack Obama, nor have I provided his campaign with advice on housing or economic matters.” Raines told McCain campaign adviser Carly Fiorina the same thing even before the ad was released. He sent Fiorina an e-mail after he heard that she had called him an adviser to Obama. The e-mail read: “Carly: Is this true? I am not an adviser to the Obama campaign. Frank." But the McCain ad ran anyway. McCain spokesman Brian Rogers said he was unaware of the e-mail.
Obama’s Connection to Jim Johnson
We addressed Jim Johnson’s connection to Obama in another wire post also in September. Johnson, who was CEO of Fannie Mae from 1991 until 1998 (he left the company in 1999), was picked to join a selection committee (along with Caroline Kennedy and Eric Holder) to help choose Obama’s vice presidential running mate. However, Johnsonresigned from the position just one week later amid allegations that he received special treatment in obtaining loans from Countrywide Financial Corp. The e-mail claims that he was "hired as a Senior Obama Finance Advisor and was selected to run Obama’s Vice Presidential Search Committee." It isn’t apparent if Johnson was selected to "run" the committee, and he clearly didn’t have much of a chance to do so. We found no reports of Johnson ever having been a "senior finance advisor" to the campaign, and Obama spokesman Tommy Vietor says he never was. 

Obama’s Connection to Tim Howard

The e-mail’s claim about Howard is pure fantasy. We found no press reports or other evidence indicating that Howard has, or ever had, any relationship with the Obama campaign, let alone being "a Chief Economic adviser." Normally, chief advisers to the campaigns do interviews with reporters and are widely quoted. When we asked the Obama campaign if Howard had ever been an adviser, spokesman Vietor said, "Timothy Howard is not a policy advisor and has not been one." Howard served as the chief financial officer for Fannie Mae until 2004, when, along with Raines, he was dismissed from the company under speculation of mismanaging Fannie’s financial records.

–D’Angelo Gore


Dobbs, Michael. "Obama’s Fannie Mae ‘Connection.’" The Fact Checker, 19 Sept. 2008

Huslin, Anita. "On the Outside Now, Watching Fannie Falter." Washington Post, 16 July 2008.