From the Washingto Post:

An Obama adviser held several positions at Fannie Mae and earned millions of dollars overseeing an office that led a lobbying effort to prevent increased oversight of the mortgage giant. Associated Press.

by Jim McElhatton

A transition adviser to President-elect Barack Obama earned millions of dollars overseeing an office that led a lobbying effort to prevent increased oversight of mortgage giant Fannie Mae, the company at the heart of the ongoing turmoil in the nation’s financial markets, public records show.

The unpaid adviser, Thomas E. Donilon, held several senior positions at Fannie Mae from 1999 to 2005, including vice president of law and policy, at a time when the company’s officers and lobbyists were insisting that now-troubled Fannie’s finances were sound.

In a 2006 report, the Office of Federal Housing Enterprise Oversight (OFHEO) said Fannie Mae lobbyists, whose office was overseen by Mr. Donilon, tried to use their ties to members of Congress to discredit federal regulators through a campaign aimed at securing the release of a U.S. Department of Housing and Urban Development report to discredit OFHEO.

“Thus, Fannie Mae succeeded in creating a large volume of negative publicity about the OFHEO examination report, in an effort to distract attention from its multibillion-dollars accounting errors,” the OFHEO report found.

“That initiative, although conceived and executed by the [Fannie Mae] government and industry relations department, was well-known by many members of senior management,” including then-Chairman and Chief Executive Officer Franklin Raines, Mr. Donilon and Fannie Mae’s general counsel, according to the OFHEO report.

Mr. Donilon wasn’t involved in the accounting irregularities that ultimately prompted OFHEO to seek more than $100 million that Fannie Mae paid out in compensation to Mr. Raines and two other top officials.

Obama aides say that Mr. Donilon will have no say in housing matters and that as a former State Department official, he’s providing valuable input during the transition.

“Mr. Donilon is volunteering his time and more than 30 years of accomplishment to help prepare the State Department for an efficient transition to the president-elect, who is taking office at a time of war and when we are confronting a complex and challenging environment,” said Obama transition spokesman Tommy Vietor.

“Mr. Donilon’s experience in foreign affairs as assistant secretary of state and chief of staff at the State Department is critical to this review process,” Mr. Vietor said.

After his years as a State Department official in the Clinton White House, Mr. Donilon was paid more than $1 million in salary and cash bonuses in 2002 and 2003 from Fannie Mae. He was registered as a lobbyist for Fannie Mae as recently as 2005, according to regulatory filings and court records.

He was dropped in 2005 from a pair of shareholder lawsuits filed by retirement plans that said he and other Fannie executives earned millions of dollars in salary, bonuses and stocks based on the company’s “improper financial results.”

The mortgage giant’s collapse loomed large during Mr. Obama’s campaign against Republican Sen. John McCain. Both sides accused the other of having top advisers with ties to Fannie Mae. McCain campaign manager Rick Davis came under fire during the campaign because of reports that he headed an advocacy group that worked against attempts to increase regulation of Fannie Mae and Freddie Mac.

Peter J. Wallison, a former general counsel in the Treasury Department who also served as counsel to President Reagan, called Fannie’s lobbying operation “a back-scratching system.”

“He was one of the archetypes of the kind of people Fannie hired,” he said referring to Mr. Donilon, saying the mortgage company often sought out well-connected political operatives.

As a former registered lobbyist, Mr. Donilon isn’t precluded from working on the transition team, which announced what it called “the strictest and most far-reaching ethics rules” last week.

The rules say federal lobbyists cannot contribute to the transition team or perform any lobbying while they work on the transition.

In addition, if a transition team member has lobbied in the past year, they’re not allowed to work in the “fields of policy on which they lobbied,” according to the rules.

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