Washington File

It is said that the selection of the vice-presidential running mate is the most important decision a presidential candidate will make.

Because it is the candidate's first public decision, it gets looked at, mulled over and much argued about.

So far, Barack Obama, the Democrat, has not done well on this front.

He started with a group of three prominent Washingtonians as his selection committee. Their job has been to oversee the many party lawyers who will delve into the backgrounds of prospective running mates and conduct interviews with those under consideration.

Jim Johnson was the selection committee chairman. But now he's been shown the door as a series of juicy revelations this week has caused him to be seen as the quintessential, overly-privileged Washington insider, the very animal that the crusading Obama has vowed to do away with.

A sweet deal

Johnson used to be the CEO of Fannie Mae, the government-sponsored organization that guarantees mortgages for millions of homeowners. He is now the boss at Perseus, a $2-billion private equity fund and had once headed up Lehman Brothers, the big investment bank.

Not bad for someone who earned his political chops working as a Senate aide and then policy chief to former vice-president Walter Mondale.

Johnson is someone who knows the power scene and where the bodies are buried in the Democratic party, which clearly recommended him to a freshman senator seeking high office. Still, he was an odd choice for a candidate like Obama who has been running a campaign of change and thundering from the platform that Washington insiders must go.

For his Republican opponent, Senator John McCain, Obama's selection of Johnson was the gift that wouldn't stop giving.

First, the Republican-friendly Wall Street Journal reported that Johnson received three mortgages totalling more than $2 million from Countrywide Financial Corporation.

The terms, said the Journal, appear to be below the current rate. But what really made the story stand out was that Countrywide was the largest customer of Fannie Mae and the central company, many would say culprit, in the current subprime lending crisis wreaking havoc across middle-class America.

There's more

The Journal also wrote that Johnson has been a central figure on compensation committees that have awarded huge payouts to corporate executives. He oversaw and approved executive pay packages, for example, at United Healthcare, a Minneapolis company that has become the newest flag bearer for corporate excess.

One United Healthcare CEO received a $124.8 million compensation payment.

The thing to keep in mind here is that one of Obama's key Senate initiatives has been legislation seeking to curb excessive executive compensation packages.

Johnson's troubles, now being happily trumpeted by the McCain camp, also includes his own pay when he was at Fannie Mae, a federal body.

In 1998, Johnson earned $21 million a year as CEO. Of course, the public never learned that until many years later when the mortgage giant was being investigated by the Securities and Exchange Commission.

Most of Johnson's earnings came from deferred stock ownership, which not included in the company's compensation table. The SEC ruled the company's 1998 earnings as "fraudulent" and said numbers were "intentionally manipulated to trigger management bonuses."

According to the Office of Federal Housing Enterprise Oversight, no executives should have received bonuses that year. Johnson, however, took home a $1.9 million gift on top of his $21-million salary.

A multi-million dollar distraction

The ultimate Washington insider, Johnson left the CEO job at Fanny Mae in 1998 for Perseus but never really left the company.

Fannie Mae wanted Johnson's contacts and insider credentials. So he was hired on as a consultant and has earned $3.3 million dollars up to 2006 in retainer fees and other services. He is also supplied with two paid employees, a chauffer, company limo for him and his wife and an extra office in the Watergate complex.

With all this buzzing around, Obama picked Johnson as his very first high-level appointment. You have to wonder why.

Johnson has subsequently resigned. "I believe Barack Obama's candidacy for president of the United States is the most exciting and important of my lifetime," he said. "I would not dream of being a party to distracting attention from that historic effort."

On the charges swirling around him, he said, "I am extremely proud of my service to Fannie Mae and in the important dimensions of public service. This withdrawal should in no way imply that I accept the blatantly false statements and misrepresentations that have been written about me in recent days."

Misses the point

That in the minds of many people is not the point. Obama is the issue, not whether Johnson is guilty of indulging himself in the corporate trough.

Obama is going to pay for this choice, particularly when the Republican ads start running in the fall.

Even the kids playing basketball on the street in front of my house know Johnson is a backroom guy who got things done, for a price.

When many of the these details about Johnson came out at the beginning of the week, Obama displayed a trait that we've seen before that he probably needs to correct: He went into defensive mode, saying Johnson had only a "tangential" role in the campaign and that he, the candidate, couldn't be expected to hire people to "vet the vetters."

Eventually, though, Obama bit the bullet and Johnson was gone, with the candidate still seemingly in denial. "Jim did not want to distract in any way from the very important task of gathering information about my vice-presidential nominee, so he has made a decision to step aside that I accept."

For Republican strategists, like Mark Corallo, speaking to the Washington Post, this is a godsend. Obama, Corallo notes has "tagged himself as a different kind of politician. He's supposed to transcend party, transcend politics.

"He's exploited that more than anyone in recent memory, and it becomes demoralizing to all the starry-eyed Obamaphiles who are saying, 'I thought he was different.'"

There is a final word. Obama picked Johnson because he had worked on two other vice-presidential selections. He led the committee that picked Geraldine Ferraro for Mondale's presidential run. (That pick was a disaster.)

And he led the committee to select John Edwards for John Kerry's campaign in 2004. Edwards is much admired but did little to help the ticket.

It's not as if he had a sterling pedigree.

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