NPR: How 'Reckless' Greed Contributed To Financial Crisis
...So Fannie Mae was on very solid footing in the early '90s, when James Johnson took over, and according to people who worked there at the time and worked with him, it became a completely political animal at that time.

It became all about preserving the government backing, preserving the -essentially the subsidies that the government was providing Fannie Mae and making sure that those sort of - that sort of special treatment or special relationship with the government never went away. ...

...He helped write the legislation in two critical ways: one, to make sure that his company did not have to maintain high levels of capital cushion - i.e., he did not have to set aside a lot of money for a rainy day if losses were to come across.

That meant that earnings were juiced. That meant his pay was increased. So that was a crucial thing that he did that wound up in the legislation. Fannie Mae's capital requirements were far lower than other banks. ...

...How big a player were they in terms of contributing to politicians and lobbying?

Ms. MORGENSON: They were very large. The numbers might not seem large in today's terms, but they were extremely shrewd and, you know, took great care, especially of the congressmen that were on the House Financial Services Committee and the senators on the Banking Committee.

They knew that these were very important people to their livelihood and to maintaining the government perquisites as they were.

One of the really big beneficiaries, albeit indirectly, was Congressman Barney Frank of Massachusetts. Back in 1991, when Congress was writing the legislation that would, you know, enhance or improve the oversight of Fannie Mae, or so they thought, Frank actually called up the company and asked them to hire his companion, who had just gotten an MBA from the Amos Tuck School of Business.

Of course the company was happy to provide a job for his companion and rolled out the red carpet in a series of interviews with a variety of executives, and it ultimately did hire the man. And he stayed there for I believe seven years. ...

...And what Phaup found, and the CBO found, was that Fannie Mae and Freddie Mac were keeping one-third of the government subsidy each year for themselves. And this was a blockbuster because Fannie Mae had said throughout history that it was - its sole purpose was to help homeowners, that it was going - if it were threatened, that homeownership would be threatened, that you would make the cost of homeownership rise significantly if you took away the government perquisites. ...

...So knowing that Countrywide was Fannie Mae's biggest provider of mortgages certainly does make one wonder about the quality of those mortgages, and certainly makes you think, well, when Fannie Mae did finally have to be rescued by taxpayers, those Countrywide loans were certainly a part of the problem.

DAVIES: And the head of Fannie Mae, James Johnson, had a special relationship with Angelo Mozilo, the executive of Countrywide, too.

Ms. MORGENSON: Yes. James Johnson understood that Countrywide was a comer, was a very aggressive, strappy company founded by an entrepreneur with a chip on his shoulder, not your typical banker. And James Johnson set about to really cultivate Mr. Mozilo and to make sure that Fannie Mae was the biggest recipient of Countrywide loans. He didn't want Countrywide selling its loans to Freddie Mac, the competitor of Fannie Mae. ...