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Jim Johnson Leaves Obama Veep Search TeamThe man who was once a Medici with your money.

By Matthew CooperPosted Wednesday, June 11, 2008, at 7:04 PM ET

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And what is the cost? The CBO calculates that the federal guarantee saves Fannie Mae about one-half of 1 percent in interest. That was worth almost $4 billion to the company in 1995 (plus another $2.6 billion to a similar organization called Freddie Mac, the Federal Home Mortgage Corp.). The CBO figures that $2.5 billion of that approximately $4 billion federal subsidy was passed along to lucky homeowners, and $1.4 billion went into the pockets of Fannie Mae shareholders and executives.

Illustration by WIlliam L. Brown. Fannie Mae's executive salaries resemble those of a real private company of its size, even though its size is largely a function of the federal guarantee and its business is not as complex as size alone would suggest. Its officers are in many ways glorified lobbyists. Johnson makes $5 million a year. Franklin Raines made well over $2 million in his last year as Fannie Mae's vice president before he joined the Clinton administration last year as director of the Office of Management and Budget. Other politicos feeding at the trough include Senior Vice President for Public Affairs John Buckley, who was on leave last year as Bob Dole's press secretary, and Executive Vice President for Housing and Law Robert Zoellick, who was an aide to James Baker.

Not surprisingly, then, Fannie Mae's public-relations operation is unparalleled in Washington. Its charitable contributions, through the Fannie Mae Foundation, are a crucial part. The foundation sprinkles contributions on everything: homeless shelters as well as hospitals, the Kennedy Center, and powerful think tanks like the Heritage Foundation (which, to its credit, has issued reports decrying Fannie Mae's privileged status).

Fannie Mae sports television ads depicting young couples, plucky immigrants, and others being helped by Fannie Mae. "Showing America a New Way Home" is the slogan. That is also the name of Johnson's recent book—a 175-page tract that pleads for still more subsidies while cloaking itself in high-mindedness. The book is a parody of Bartlett's, serving up quotes from Lincoln, Jefferson, and Roger Rosenblatt with equal pomposity. The cover shows Johnson, a bland-looking man in full business attire, on the porch of an all-American home that looks a tad too small to be his. The flag is conveniently draped in the background. The back jacket is crammed with bipartisan blurbs—from Jack Kemp to Vernon Jordan, Dianne Feinstein, and Ann McLaughlin, George Bush's secretary of labor. Acknowledgments are offered to any number of Washington big shots, including Slate's own Robert Shrum, who is thanked for his "considerable editing skills." Alas, the text could have done with more Shrum, who, let's hope, did not pen the line, "Home is about freedom."

The book's subtitle is "Expanding Opportunities for Home Ownership." Johnson's idea of opportunity ranges from the unobjectionable—like giving banks better software for mortgage applications—to a bunch of new subsidies, many of which, sadly, Clinton and the Republican Congress may enact. The truth about government subsidies for real estate—including the granddaddy: the home-mortgage-interest deduction—is that they do very little to make housing more affordable. Part gets siphoned off by middlemen like Fannie Mae. Most of the rest melts away into higher real-estate prices. The main beneficiary of any subsidy for real estate is the person who owns the property at the time the subsidy is instituted, not the future buyer.

Fannie Mae, unfortunately, has become a model. There is Freddie Mac, Fannie Mae's smaller cousin in the housing market. And there is Sallie Mae (Student Loan Marketing Association), which creates a similar secondary market in subsidized student loans. Organizations combining public and private functions appeal to the woolly ideal of government-business partnership. They seem to represent a third way, a healthy distrust of government and the market, levelheadedness leavened by a kind heart. More often, as with Fannie Mae, what you get is the worst excesses of both.