Wednesday, July 02, 2008

Obama and the audacity of political influence

Here are excerpts from a story in today’s Washington Post followed by my commnts below the star line.

WaPo begins - - -

Shortly after joining the U.S. Senate and while enjoying a surge in income, Barack Obama bought a $1.65 million restored Georgian mansion in an upscale Chicago neighborhood. To finance the purchase, he secured a $1.32 million loan from Northern Trust in Illinois.

The freshman Democratic senator received a discount. He locked in an interest rate of 5.625 percent on the 30-year fixed-rate mortgage, below the average for such loans at the time in Chicago. The loan was unusually large, known in banker lingo as a "super super jumbo." Obama paid no origination fee or discount points, as some consumers do to reduce their interest rates. …

Obama spokesman Ben LaBolt said the rate was adjusted to account for a competing offer from another lender and other factors. "The Obamas have since had as much as $3 million invested through Northern Trust," he said in a statement.

Modest adjustments in mortgage rates are common among financial institutions as they compete for business or develop relationships with wealthy families. But amid a national housing crisis, news of discounts offered to Sens. Christopher J. Dodd (D-Conn.), chairman of the banking committee, and Kent Conrad (D-N.D) by another lender, Countrywide Financial, has brought new scrutiny to the practice and has resulted in a preliminary Senate ethics committee inquiry into the Dodd and Conrad loans.

Within Obama's presidential campaign organization, former Fannie Mae chief executive James A. Johnson resigned abruptly as head of the vice presidential search committee after his favorable Countrywide loan became public.

Driving the recent debate is concern that public officials, knowingly or unknowingly, may receive special treatment from lenders and that the discounts could constitute gifts that are prohibited by law.

"The real question is: Were congressmen getting unique treatment that others weren't getting?" associate law professor Adam J. Levitin, a credit specialist at Georgetown University Law Center, said about the Countrywide loans. "Do they do business like that for people who are not congressmen? If they don't, that's a problem." …

When the Obamas secured the loan, their income had risen dramatically. Obama assumed his Senate seat in January 2005, with an annual salary of $162,100. That same month, Random House agreed to reissue an Obama memoir, for which it originally paid $40,000, as part of a $2.27 million deal that included two future nonfiction books and a children's book.

Around the same time, the University of Chicago Hospitals promoted Michelle Obama to a vice president and more than doubled her pay, to $317,000. …

Unlike Countrywide, where leaked internal e-mails documented a special discount program for friends of chief executive Angelo Mozilo, Northern Trust says it has no formal program to provide discounts to public officials. Loan officers may consider a borrower's occupation when establishing an interest rate, the bank said.

"A person's occupation and salary are two factors; I would expect those are two things we would take into consideration," said Northern Trust Vice President John O'Connell. "That would apply to anyone seeking to get a mortgage at Northern Trust." He added that the rates offered to Obama were "consistent with internal Northern Trust rates at that time."

"The bottom line is, this was a business proposition for us," he said. "Our business model is to service and pursue successful individuals, families and institutions."

O'Connell referred additional questions to the campaign.

Since 1990, Northern Trust employees have donated more than $739,000 to federal campaigns, including $71,000 to Obama, according to the Center for Responsive Politics.

Obama's house purchase has been a source of controversy. In 2006, the Chicago Tribune reported that on the day of the closing, the wife of Obama's longtime friend and fundraiser Antoin "Tony" Rezko closed on an adjoining lot that had been the estate's side yard.

The Obamas bought the house for $300,000 less than the asking price of $1.95 million, while Rezko's wife, Rita, bought the neighboring lot for the full asking price of $625,000. Rita Rezko later sold a portion of the undeveloped lot to the Obamas, enlarging the senator's yard.

Tony Rezko already had been linked to a grand jury investigation involving public corruption. Last month, he was convicted of 16 counts in an influence-peddling scheme that reached the highest levels of Illinois state government.

Here’s the entire WaPo story.


Senator Obama’s friend and pastor of 20 years said he’s “just another politician.” Does anyone want to dispute that?

WaPo’s story brought to mind the 19th century Tammany Hall pol’s explanation of how he grew rich “serving” the public: “I seen my opportunities and took ‘em.”

The Obamas have obviously taken advantage of his political position to rack up some sweet deals. Northern Trust’s was nice. Tony Rezko’s was really nice. And that Random House $2.27 million deal? It doesn’t get much nicer than that.

Suggested title for Obama’s next book: The Audacity of Political Influence.


Anonymous said...

Mr. Obama is making all the right sounds, but let's face it, he talks the talk, but so far I don't see him walking the walk. Are we supposed to look at his background and his associates and then believe him when he waves the flag and makes mushy patriotic comments? He's simply saying what his handlers tell him to say.
Tarheel Hawkeye

Anonymous said...


The WaPO article states that:

"Obama's house purchase has been a source of controversy. In 2006, the Chicago Tribune reported that on the day of the closing, the wife of Obama's longtime friend and fundraiser Antoin "Tony" Rezko closed on an adjoining lot that had been the estate's side yard."

If I bought a property and used it for security for a mortgage (a secured loan), I wouldn't have been able to sell that property without paying off the loan. Did the Obamas reduce the principle of their loan when they sold off their $600,000.00 side yard? Or did they just reduce the value of the property? The article didn't make that clear.

Anonymous said...

John -

Sounds an awful lot like Hillary's killing on the cattle futures market. The other term for it might be, money laundering.

Jack in Silver Spring
& Ditto to TH

Archer05 said...

When the liberal San Francisco journalist was comparing Cindi McCain to Michelle Obama, she could have added:

Michelle nearly tripled her income from the University of Chicago Hospital when her husband was elected a United States Senator.

Of course, that did not fit the narrative.

Anonymous said...


The Obamas bought a home and land valued at $1.65 M, with a $1.32M loan. That meant there was $.33M in value over the loan.

The Obamas sold the side yard for $.625M a day or so later. That would mean $1.65M - $.625M = $1.03M in value of home and lot.

Was the loan value still $1.32M after the side lot was sold? If so a $1.32 loan was secured with a property valued at a lot less than the loan within a week. That seems very strange.