Fannie Mae's accounting came under scrutiny in late 2003, after its sister organization, Freddie Mac, disclosed it had misstated its accounting.
Seeing the problems, OFHEO stepped up its monitoring of Fannie Mae and in a preliminary report in 2004 alleged the company had improperly used reserves to smooth its earnings.
Fannie Mae executives began pushing back hard against the increasing oversight. Its lobbyists -- overseen by Donilon -- pushed U.S. lawmakers to limit OFHEO's budget, and make it subject to annual approval. "[W] ith the knowledge and support of senior management, " Fannie Mae's lobbyists "used their longstanding relationships with Congressional staff to attempt to interfere with OFHEO's special examination," according to the report.
They also tried to get OFHEO investigated. Email trails show that Fannie Mae lobbyists drafted legislation which required a probe into how the agency spent its money.
And Fannie Mae's head lobbyist at the time, Duane Duncan, told OFHEO investigators that Fannie Mae lobbyists had "generated the request" from a congressman for the probe into OFHEO that looked into allegations that the agency had improperly leaked information about Fannie during its probe of the mortgage giant.
While that effort was "conceived and executed" by the government relations team, it was "well known by many members of senior management" including Donilon," the report stated.
Duncan reported directly to Donilon, and OFHEO concluded Donilon was aware of his team's efforts. According to the report, the two met at the end of each day for "Donilon to manage the implementation of the decisions." During weekly strategy meetings, the report said, Raines and Donilon were "deciding what positions Fannie Mae would take on any given issue."
Donilon isn't the only member of the Obama team who has worked for one of the government-backed housing enterprises. Wendy Sherman, who is working with Donilon the State Department agency review team, served on the board of Fannie's charity. And Rahm Emmanuel, who will be Obama's chief of staff, served on the board of Freddie Mac, which also restated its earnings.