Oct. 19, 2010 (TruthDig) -- 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.