One day as Wall Street was crashing, President George W. Bush had the temerity to plaintively ask his treasury secretary, Henry Paulson: "How did this happen?" Paulson, who headed Goldman Sachs before taking the Treasury job, remarks in his memoir: "It was a humbling question for someone from the financial sector to be asked--after all, we were the ones responsible."
That's an honest enough admission about the culpability of the financial community in bundling the toxic derivatives packages still disastrously undermining the economic health of the nation. Even more startling was Paulson's admission in his memoir that he, at the time he was advising the president, still did not know that home mortgages were at the heart of those troubling securities that his former company had marketed to others with such wild abandon.
Were President Barack Obama to ask that question about the origins of this crisis of Tom Donilon, one of his closest aides whom he recently appointed to the critical job of national security adviser, Donilon would find it even more awkward to invoke the defense of ignorance. As the chief lobbyist for Fannie Mae from 1999 to 2005, he was far more intimately involved than Paulson in the manufacturing of this crisis. He successfully pressured Congress to give Fannie Mae the green light to speed past any sound regulation. Indeed, had Congress endorsed the barest semblance of regulation of the Fannie Mae-led housing scam, it would have been stillborn instead of being a very much alive Frankenstein creation.
Fannie Mae paid Donilon, a longtime Democratic Party operative, $15 million to lobby Congress to gut the power of government regulators to check the scandalous behavior in what would have been judged a crime until a majority of pro-Wall Street Republicans and Democrats in Congress rewrote the laws. He was also a top executive at Fannie Mae during the period when cooking the books to increase executive compensation would later lead to a $400 million fine. In pursuit of those profits, Fannie Mae entered into a partnership with Angelo Mozilo's shady Countrywide Financial, and together they produced the computerized CLUES and MERS credit verification and mortgage registration systems that are at the heart of the housing swindle. Mozilo at least was finally slapped with a huge fine last week, while Donilon has yet to return a penny.
Why in the world would President Obama, whose legacy has been sabotaged by a housing crisis that Donilon helped create and conceal, have hired him to run the most sensitive position of public trust in his administration? Because he is one of the most skilled of the Washington players, and, as this president has demonstrated so often with his key appointments, it's the top hustlers of whom he seems enamored. "He has a probing intellect and a remarkable work ethic," Obama stated this month upon appointing Donilon, thereby reducing ethics to a variant of ambition rather than morality, "although it's one that depends on a seemingly limitless quantity of Diet-Coke." Ha, ha. But of course Obama must avoid questioning the connection of that work ethic to the impoverishment of tens of millions of homeowners. When Donilon first entered his presidential campaign in 2008, Obama knew he had been working as a legal adviser to Goldman Sachs and Citigroup, two firms that had to depend on government bailouts to survive a housing crisis they helped create.
Behind the wonderfully engaging smile of this president there is the increasingly disturbing suggestion of a cynical power-grabbing politician whose swift rise in power reflects less the earnestness of his message and far more the skills of a traditional political hack. If there was more of the sincere community organizer in the inner makings of this man, he would not have turned to one of the architects of a housing scam in filling a leadership position in his administration. Why assume that Donilon will now run our foreign policy, wrapped as it is in a secrecy that endangers so many, with any greater sense of moral integrity than he employed when he enriched himself by impoverishing so many ordinary Americans not blessed with his political connections?
The more one learns about the political roots of our economic meltdown, the more the Democratic Party stands revealed as an equal partner with the Republicans at the center of corruption. Donilon has worked for most of the party's top dogs, including Walter Mondale, Jimmy Carter, Bill Clinton and Joe Biden. Surely the Republican ideologues who want to end all government consumer protections and are quite adroit at lining their own pockets are no better, but that is cold comfort. We are drowning in a bipartisan cesspool of corruption, and the sooner we grasp that fact the better.