Resisting Corporate Corruption, 3rd Edition

Case 2Juggling Public Policy, Politics and Profits at Fannie Mae

If they only knew what it took to balance these conflicts, they’d back off and let us get on with helping the housing market function for all Americans.

IT WAS A MOMENT OF RUEFUL REFLECTION FOR Jim Johnson, chairman and CEO of the Federal National Mortgage Association (“Fannie Mae”). The time was summer 1998. Johnson had been Fannie Mae’s head for seven years. During that time profits had soared 400%. Fannie’s shareholders had responded by driving up its stock price. Johnson himself had profited greatly. His annual compensation now exceeded $5 million, a level comparable to corporate titans Jack Welch (GE) and Walter Shipley (Chase Bank).¹ Attempts to alter Fannie’s charter had been beaten back. All things considered, Johnson should have felt great satisfaction; yet, he was itchy and uncomfortable. In fact, Johnson was thinking of leaving at the end of the year.

Johnson wondered why he felt eager to move on—ambition was undoubtedly part of the story. Bob Rubin, the present U.S. Treasury Secretary and his friend, was moving back to the private sector. Johnson wanted to replace him. That desire alone didn’t account for his feelings. Something else, something less pleasant, was at work here.

That something, Johnson decided, was a set of powerful constituencies trying to pull Fannie in very different directions. On one side were the ‘Housers,’ a set of activists, academics and politicians who fervently believed that ...