Former Fannie Mae Exec as White House Chief of Staff?

As White House watchers mull possible replacements for Chief of Staff Rahm Emmanuel, Deputy National Security Adviser Thomas Donilon appears to be on the short list.

Donilon was part of the Obama transition team and served in the Clinton and Carter administrations.

But one listing on his resume could cause President Obama and his vetting team a headache.

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Donilon was also Executive Vice President for Law and Policy at Fannie Mae (2000-2005) during investigations into accounting irregularities at the mortgage giant and was accused of overseeing a lobbying campaign against those investigations in a scathing government report.

It all started back in the headier days of the housing market, just before the boom but just after Freddie Mac admitted to accounting errors in 2003; that's when Fannie and Freddie's overseer, the Office of Federal Housing Enterprise Oversight (OFHEO), which later became the Federal Housing Finance Agency (FHFA) began looking into Fannie Mae's accounting practices. An early report claimed Fannie was using reserves to improve its earnings.

A May 2006 "Report of the Special Examination of Fannie Mae" by OFHEO says Donilon oversaw a major lobbying campaign against the accounting probe by Fannie Mae. Donilon was not accused of participating in the accounting issues, which ultimately led to a $400 million settlement with the Securities and Exchange Commission in 2006 (Fannie Mae did not admit any improprieties). But according to the OFHEO report:

The report is very long and full of instances that show lobbyists under Donilon's charge fought the OFHEO investigation and even tried to counter, pushing an investigation into OFHEO. The report also cites a 2003 email from then COO (and later CEO) Daniel Mudd to Donilon, exposing what OFHEO calls "efforts to generate interagency conflict":

I spoke to [a Treasury Department official], he had agreed to talk to [the SEC] on "what to do if OFHEO was not falling in line" already ([another Treasury official] had already bent his ear about OFHEO obstructionism)…promised me he'd check in to see where things were and would call [the SEC] when needed.

Donilon left Fannie Mae in 2005, before the release of the report and of course well before the conservatorship. For those of you keeping track, from 2001 to 2003, Donilon received $1,889,821 in bonuses from Fannie Mae. Now he's up for a job that would put him right in the center of White House policy-making, and vital discussions and decisions relating to the future of housing finance.

"Given that the disposition of Fannie and Freddie will be a top issue leading into the 2012 election, the White House will need to consider the perception involved in having a former top Fannie official in such a high profile position in the West Wing," says and industry insider.

It's no secret, given all the Congressional hearings following the fall of Fannie and Freddie and the ensuing government conservatorship, that Fannie Mae did not take well to government regulation. Ask any taxpayer. That's why the top management was ousted and a kinder gentler Fannie and Freddie are supposedly kowtowing to their conservators and doing their best to save the housing market.

Still, with reform of the two mortgage giants on the administration's front burner, I have to ask how someone who was a part of the old guard at Fannie Mae becomes part of the new guard at the White House without a few raised eyebrows.

I have contacted Mr. Donilon's office as well as the White House for comment. So far no responses.

Questions? Comments? RealtyCheck@cnbc.comAnd follow me on Twitter @Diana_Olick