WSJ editorial falsely claimed Obama bought "property at a discount ... from Tony Rezko"

››› ››› KATHLEEN HENEHAN

The Wall Street Journal asserted in an editorial that Sen. Barack Obama bought "property at a discount ... from Tony Rezko." However, according to documents posted on the Obama campaign website, Obama paid $104,166 for the piece of property in question -- well above its appraised value of $40,500.

In a June 11 editorial, The Wall Street Journal asserted: "[Sen.] Barack Obama may have come up with a creative way to solve the housing recession: Let everyone buy property at a discount the way he did from [convicted Chicago businessman Antoin] Tony Rezko, and give everyone in America a discount mortgage the way [CEO] Angelo Mozilo of Countrywide did for Fannie Mae's [former CEO] Jim Johnson." In fact, contrary to the Journal's assertion that Obama "b[ought] property at a discount ... from Tony Rezko," according to documents posted on the Obama campaign website, Obama paid Rezko $104,166 for the piece of property in question -- well above its appraised value of $40,500, as Media Matters for America has repeatedly noted. Moreover, while the Journal stated as fact that Johnson, appointed by Obama to vet potential running mates, received "a discount mortgage" from Countrywide Financial Corp., and noted that "Journal reporters Glenn Simpson and James Hagerty broke the story this weekend," Simpson and Hagerty actually reported (subscription required) on June 7 that it is "impossible to tell for sure from public documents" whether Johnson received the mortgages at "preferential rates."

After writing that Johnson received "a discount mortgage" from Mozilo, the Journal further asserted:

Despite an exhaustive federal inquiry, Mr. Johnson managed to avoid disclosing one very special perk: below-market interest-rate mortgages from Countrywide Financial, arranged by Countrywide CEO Angelo Mozilo. Journal reporters Glenn Simpson and James Hagerty broke the story this weekend.

In fact, in the June 7 news report to which the editorial referred, Simpson and Hagerty did not report as fact that Johnson had received such a "perk" from Mozilo. Rather, they wrote that "it's impossible to tell" whether Johnson received mortgages from Countrywide at "preferential rates." Simpson and Hagerty further reported that "[a]n array of other factors also can account for lower-than-average rates, including a borrower's income, total assets and credit score; how big the loan is compared with the home's value; and how many 'points' a borrower may have paid upfront in order to get a lower rate." From the June 7 Journal article:

A comparison of the Fannie Mae officers' terms with interest rates prevailing when they got their loans raises the possibility Countrywide gave them preferential terms. But it's impossible to tell for sure from public documents. An array of other factors also can account for lower-than-average rates, including a borrower's income, total assets and credit score; how big the loan is compared with the home's value; and how many "points" a borrower may have paid upfront in order to get a lower rate.

One former Countrywide executive said the mortgage lender, the nation's largest, sometimes granted "moderate" concessions on rates for customers whose loans were handled by Mr. Mozilo or other top officers. These loans were reviewed by others at the company, the former executive said, and occasionally Mr. Mozilo had to be told the terms he had promised someone couldn't be granted.

[...]

Property records show Mr. Johnson has received more than $7 million in loans from Countrywide since 1998, the first coming in the waning days of his Fannie Mae tenure. He borrowed $392,950 on a row house in Washington's Dupont Circle neighborhood, with the rate set for the first five years at 6.375%.

At the time, initial rates for such loans ranged from about 6.2% to 6.5%, according to data compiled for The Wall Street Journal by HSH Associates Inc., which surveys lenders. Rates depend partly on how much borrowers pay in points, if any, to lower their interest charge. Records don't show whether Mr. Johnson paid points or if so how many.

Mr. Johnson returned to Countrywide several times to finance his growing real-estate holdings. In November 2001, he received a Countrywide loan of $1.3 million for a home in Palm Desert, Calif. The rate was 5.250% for five years, then became adjustable. Rates on such loans averaged about 6% to 6.2% about that time, HSH says.

In June 2003, Mr. Johnson obtained a $971,650 mortgage on a house in upper northwest Washington, D.C., with a rate of 3.875% for the first five years. About that time, the market average was about 4.3% to 4.9%, according to HSH.

In January 2006, Mr. Johnson got a $5 million home-equity line of credit from Countrywide on a residence in Ketchum, Idaho, near the Sun Valley ski resort. And in December 2007 he received a Countrywide home-equity line of credit for $1.01 million and executed a $1 million promissory note in connection with that home.

Asked about the loans, a lawyer for Mr. Johnson, Brian Brooks, wrote that "it appears that the arrangements you cite are well within the band of standard industry practices with regard to price and structure of loans to borrowers of Mr. Johnson's background." Mr. Johnson is now vice chairman of Perseus LLC, a merchant bank with offices in Washington and New York.

On June 11, Johnson resigned as chairman of Obama's vice presidential search committee.

From The Wall Street Journal's June 11 editorial:

Barack Obama may have come up with a creative way to solve the housing recession: Let everyone buy property at a discount the way he did from Tony Rezko, and give everyone in America a discount mortgage the way Angelo Mozilo of Countrywide did for Fannie Mae's Jim Johnson. Team Obama's real estate and mortgage transactions are certainly a change from business as usual. They suggest old-fashioned back-scratching below even current Beltway standards.

A former CEO of mortgage financing giant Fannie Mae, Mr. Johnson is now vetting Vice Presidential candidates for Mr. Obama. But he is also a textbook case for poor disclosure as regulators sifted through the wreckage of Fannie's $10 billion accounting scandal. Despite an exhaustive federal inquiry, Mr. Johnson managed to avoid disclosing one very special perk: below-market interest-rate mortgages from Countrywide Financial, arranged by Countrywide CEO Angelo Mozilo. Journal reporters Glenn Simpson and James Hagerty broke the story this weekend.

Network/Outlet
Wall Street Journal
Stories/Interests
Barack Obama, 2008 Elections
We've changed our commenting system to Disqus.
Instructions for signing up and claiming your comment history are located here.
Updated rules for commenting are here.