In the mid-1990s, he headed up a power trifecta: mortgage giant Fannie Mae, the John F. Kennedy Center for the Performing Arts and the Brookings Institution, one of the city’s most prominent think tanks. At various times, political insiders have floated his name in Democratic administrations for White House chief of staff, Treasury secretary and president of the World Bank.
His circumspect ways – rare in a town known for its shameless attention seekers – have helped make the reserved Minnesotan one of Washington’s most influential powerbrokers and an early pick by the Obama campaign to handle the sensitive search for a running mate.
Yet despite Johnson’s legendary fastidiousness, his high-profile campaign role has suddenly exposed him to questions about his financial dealings. The questions range from his relationship with the embattled CEO of mortgage lender Countrywide Financial to his more recent oversight roles on various corporate compensation committees that approved hefty executive pay packages.
In a presidential campaign where the subprime mortgage crisis and high corporate salaries figure to be staples of debate, Johnson is now at risk of becoming a political liability for Obama, who’s trying to sell anxious voters on an economic message that calls for stricter financial industry regulation and ridding Washington of special favors and tax breaks for wealthy CEOs.
On Saturday, the Wall Street Journal reported that Johnson received at least $7 million worth of home loans from Countrywide through an informal program for friends of company CEO Angelo Mozilo that offered rates below the market average. At least four of the loans were issued while Johnson was employed either as the CEO or an outside consultant for Fannie Mae.
In 2006, five companies where Johnson served on compensation committees came under fire from Institutional Shareholders Services and The Corporate Library, two corporate compensation research companies, for accounting errors and failing to sufficiently tie executive payment to performance.
On Monday, presumptive Republican nominee John McCain referred to Johnson’s ties to Countrywide in an interview with Fox News.
“I think it suggests a bit of a contradiction talking about how his campaign is gonna be not associated with people like that. Clearly he is very much associated with that,” McCain said.
Countrywide, one of the nation’s biggest lenders, has come under significant scrutiny for its role in the current housing crisis by issuing risky, subprime loans. Obama has criticized the firm’s executives for taking millions in compensation, as consumers struggle to stay in their homes.
For the Obama campaign, the flap emerged as an unwelcome distraction as he kicked off a two-week economic tour in North Carolina—one which threatened to seriously undermine his message.
“It’s the height of hypocrisy for the McCain campaign to try and make (the loans) an issue when John Green, one of John McCain’s top advisors, lobbied for Ameriquest, which was one of the nation’s largest subprime lenders and a key player in the mortgage crisis,” responded the Obama campaign, which described the media scrutiny of the loans as “overblown and irrelevant.”
Signaling the campaign’s intention to fan the flames over Johnson’s ties to Countrywide, McCain spokesman Tucker Bounds issued the following statement in response.
"There is nothing 'overblown and irrelevant' about millions of Americans facing foreclosure and Barack Obama entrusting his most important decision as a presidential candidate to a man who has accepted millions in special loans from a subprime mortgage lender.”
Johnson, who is a vice chairma of the private banking firm Perseus LLC, did not return calls for comment.
Despite the controversy, Democratic insiders maintain that Johnson is highly-skilled at the vetting process, having handled the responsibilities for Walter Mondale in 1984 and John Kerry in 2004.
“He’s been around for a long time and I think he learned from his various experiences,” said former Rep. Martin Frost (D-Texas), now a partner at law firm Polsinelli Shalton Flanigan and Suelthaus. “He’s a very respected person in the Democratic Party. People look to him as having good judgment.”
In 2004, Johnson eventually pared down a wide range of candidates to about 25 serious contenders. A team of about 100 aides poured through their public documents, school transcripts, videos, legislation, and health and military records.
“There was an understanding that first of all the information that is being disclosed is highly confidential,” recalled political consultant Tad Devine, an adviser on the Kerry campaign. “He’s known some of these people for years and years. He has a relationship with them, and they know they could trust him and he would be straight with them.”
For all the work put into the search, the pairing between Kerry and then-North Carolina Sen. John Edwards wasn’t a perfect match. During the campaign, the candidates struggled to warm to each other and eventually failed to mend a frosty relationship.
But the disappointing outcome doesn’t diminish Johnson’s scrutinizing skills, say Democratic insiders, who argue he is an ideal vetter for Obama’s campaign.
“Sen. Obama wants to send the message to the media and the political community that this is going to be a very strong process and it’s going to make a serious decision,” said Democratic political strategist Bill Carrick. “You don’t want to reinvent the wheel.”