Raines, Obama and the Media

Raines, Obama and the Media

By Jack Kelly - September 23, 2008

The Washington Post is a "pretty flimsy" source of information, two Post hotshots declared in an effort to diminish a politically uncomfortable association for Sen. Barack Obama.

Franklin Raines, CEO of the Federal National Mortgage Association (Fannie Mae) from 1999-2004, is the individual most responsible for the subprime mortgage crisis. It was on Mr. Raines' watch that Fannie Mae went bankrupt.

He was accused of manipulating earnings statements so he could be paid bonuses to which he was not entitled.

In July, Mr. Raines was interviewed by Anita Huslin, a business reporter for the Washington Post.

"In the four years since he stepped down as Fannie Mae's chief executive under the shadow of a $6.3 billion accounting scandal, Franklin D. Raines has been quietly constructing a new life for himself," Ms. Huslin's story began. "He has shaved eight points off his golf handicap, taken a corner office in Steve Case's D.C. conglomeration of finance, entertainment and health care companies and, more recently, taken calls from Barack Obama's presidential campaign seeking his advice on mortgage and housing matters."

Sen. John McCain pounced. In an ad Sep. 18, he said: "Obama has no background in economics. Who advises him? The Post says it's Franklin Raines, for 'advice on mortgage and housing policy.' Shocking. Under Raines, Fannie Mae committed 'extensive financial fraud.' Raines made millions. Fannie Mae collapsed. Taxpayers? Stuck with the bill."

The Obama campaign rushed out statements by Mr. Raines denying he had offered Sen. Obama advice, and by Sen. Obama denying he had sought it.

Who was the source for Ms. Huslin's assertion that the Obama campaign had solicited Mr. Raines' advice? Mr. Raines himself.

"I asked Huslin to provide the exact circumstances of that passage," wrote Michael Dobbs, who writes the Post's Fact Checker blog. "She said she was chatting with Raines during the photo shoot, and asked 'if he was engaged at all with the Democrats' quest for the White House. He said that he had gotten a couple of calls from the Obama campaign. I asked him about what, and he said, Oh, general housing, economy issues.'"

But that conversation is "pretty flimsy" evidence, Mr. Dobbs said. "The McCain campaign is clearly exaggerating wildly in attempting to depict Franklin Raines as a close adviser to Obama," he said.

Howard Kurtz, the Post's media writer, said: "(Raines) has never been a close adviser to Obama."

The McCain campaign never said he was. The only description in the ad of the Obama-Raines relationship is a direct quote from Ms. Huslin's story. To diminish the impact on Sen. Obama of the disclosure of an unsavory association, Mr. Dobbs and Mr. Kurtz distorted what Sen. McCain actually said.

The furious efforts of Mr. Dobbs and Mr. Kurtz to spin on behalf of Sen. Obama at the expense of their own newspaper are hilarious. But they were topped by Karen Tumulty of Time magazine, who said the McCain ad was "racist" because both Sen. Obama and Mr. Raines are black.

"Sinister images of two black men, followed by one vulnerable looking elderly white woman," she wrote.

Proof the ad is racist, Ms. Tumulty said, is because it doesn't mention "a far more significant tie -- that of Jim Johnson, the former Fannie Mae chairman who had to resign as head of Obama's vice presidential search team."

That's because the McCain campaign devoted a separate ad to Mr. Johnson, Mr. Raines' predecessor at Fannie Mae.

Mr. Johnson and Mr. Raines aren't the only figures in the subprime mortgage scandal to be connected to the Obama campaign. Jamie Gorelick, rumored to be an attorney general candidate in an Obama administration, was vice chairman of Fannie Mae from 1997 to 2003. Penny Pritzker, Mr. Obama's national finance chairman, has been described as "the Michael Milken of the subprime mortage crisis" for her pioneering of the packaging of bad loans with good ones at her now defunct Superior bank in suburban Chicago.

"The financial engineering that created the financial meltdown was developed by the Pritzkers and Ernst and Young, working with Merrill Lynch to sell bonds securitized by sub-prime mortgages," said Timothy Anderson, a retired bank consultant.

These connections -- and Mr. Raines' own words -- contradict the notion he was the peripheral figure to the Obama campaign Mr. Dobbs, Mr. Kurtz and Ms. Tumulty would like you to believe.

"I no longer trust the major newspapers or television networks to provide consistently accurate and fair reporting of all the charges and counter-charges," wrote Stuart Taylor in the National Journal Sep. 20.

Jack Kelly is a columnist for the Pittsburgh Post-Gazette and The Blade of Toledo, Ohio.

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