OMB’s Raines Quits to Head Fannie Mae

Budget Director Franklin D. Raines announced Tuesday that he is resigning to become chairman and chief executive officer of mortgage company Fannie Mae, and President Clinton chose Jack Lew, a longtime White House and congressional aide, as Raines’ replacement.

Raines was Fannie Mae’s vice chairman when he was picked to be director of Clinton’s Office of Management and Budget. Fannie Mae, the Federal National Mortgage Assn., is the country’s biggest source of money for home mortgages, providing hundreds of billions of dollars for low- and middle-income people to buy homes.

“Accepting this once-in-a-lifetime opportunity, here in Washington, D.C., is the right thing to do for me and my family,” Raines, 49, wrote in his resignation letter to Clinton.

Though Fannie Mae spokeswoman Janice Daue said Raines’ compensation had not yet been determined, she said the man he will replace, James A. Johnson, earned about $7 million last year. Raines reported making $5.8 million in 1996 as the company’s vice chairman. As budget director, he earned $151,800 annually.

Raines will join Fannie Mae’s board of directors May 21 and become chairman and chief executive officer Jan. 1, when Johnson retires. Johnson, 54, will continue serving on Fannie Mae’s executive board, Daue said.

Lew, 42, now Raines’ deputy, is expected to have little trouble winning Senate confirmation to replace Raines, who leaves May 20. Lew’s five years at the White House included a role in talks that produced last summer’s budget-balancing deal with Republicans. Raines also helped negotiate the pact.

He also worked 14 years for congressional Democrats, including a stint as a top advisor to the late House Speaker Thomas P. “Tip” O’Neill Jr. (D-Mass.).

At a press conference announcing Raines’ departure and Lew’s selection, Clinton lauded Raines as “a brilliant OMB director, a leader of this administration, a trusted advisor, an able spokesperson and a real friend.”

Indeed, the urbane, soft-spoken Raines was a leading candidate to replace Erskine Bowles as White House chief of staff earlier this year until Bowles decided to stay.

Raines, the first black budget director, drew praise from Republicans as well. Senate Budget Committee Chairman Pete V. Domenici (R-N.M.) called him “a man of great talent and patience.”