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Special Report
Countrywide Corruption on Capitol Hill
The report is on the sleaziest mortgage lender of them all.
Four years have passed since the financial crisis that for a time threatened to carry America’s economy into the abyss. The epicenter of the crash was the housing market. No mortgage lender had a more malign influence than Countrywide Financial Corp., which, a House committee found, bought itself political clout by giving cheap loans to important political and industry officials.
So-called influence peddling on Capitol Hill is neither new nor surprising. Although housing is essential for all Americans, home ownership is not. The industry, from builders to realtors to financers, has sought government support to inflate housing demand. And, not incidentally, their profits.
There were a lot of influential players with a role in the subprime lending debacle. Government simultaneously strong-armed and subsidized financial institutions into providing mortgages to people with ever poorer credit ratings. One of the largest was Countrywide Financial Corp., which developed a special relationship with Fannie Mae. The latter, along with its companion government-sponsored enterprise Freddie Mac, did so much to trigger both the financial crisis and succeeding bail-outs.
Countrywide was swept away by the resulting deluge. The firm’s portfolio of bad loans destroyed its finances, causing the company to crash and burn in 2008. The wreckage was taken over by Bank of America.
According to a multi-year investigation by the House Oversight and Government Reform Committee, Countrywide used preferential loans to win political influence. The oversight committee is chaired by Rep. Darrell Issa (R-MI), who explained that “Countrywide lobbyists and CEO Angelo Mozilo used discounted loans as a tool to ingratiate itself with policymakers in an effort to benefit company’s business interest.”
The company maintained a “VIP Program” which offered mortgages at special terms. “This preferential treatment — that varied depending on the influence of the borrower — was not routinely offered to the public,” explained the committee’s new report, “How Countrywide Used its VIP Loan Program To Influence Washington Policymakers.”
Mozilo was the most important of the many top company employees who recommended inclusion of particular borrowers. In one case he emailed his administrative assistant instructing her to make certain that the firm “approves this loan right away and that we give the borrower an employee discount. Please let me know if the buyer is satisfied and if they are ready to close their loan. Stay close to this deal because this is a very important person.”
No one alleges formal bribery. As Michael Kinsley observed long ago, the real scandal in Washington almost invariably is what is legal. Like handing out cheap loans to lawmakers, regulators, and partners. Mark Tapscott of the Washington Examiner noted that with Countrywide “winks and nudges, and everything is OK.”
The VIP Program was established in 1991 for company executives and friends. The program gave out 17,979 loans, though the log listed duplicate loans and may not have included every borrower. VIP borrowers won fee exemptions and discounted interest rates.
The privileged also didn’t have to fill out applications. Committee investigators discovered that “Account Executives in the VIP unit had to fill in blanks on loan applications because ‘Friends of Angelo’ were reluctant or unwilling to provide basic information such as salary and employment information.” Internal procedures insisted that lack of documentation was not to block loan approval.
Nor did borrowers need good credit ratings. Explained the committee: “the suite of benefits available to VIP borrowers also included various exceptions to Countrywide company policies regarding minimum credit scores, income and employment documentation, and access to interest rate ‘float downs.’ For some VIP borrowers, Countrywide financed commercial and multi-unit properties.” In the latter case, anyone else would have been told to apply elsewhere.
Countrywide spread its largesse widely. Explained the committee:
Between January 1996 and June 2008, Countrywide’s VIP loan unit made hundreds of loans to current and former Members of Congress, congressional staff, high-ranking government officials, and executives and employees of Fannie Mae, including Chairman James “Jim” Johnson, Franklin Raines, and Daniel Mudd. VIPs who worked at Fannie Mae enjoyed expedited loan processing and pricing discounts. Countrywide also waived company guidelines for Fannie Mae’s senior executives to a greater extend than it did for “regular” VIPs.
First came legislators. According to the oversight committee, Countrywide lobbyist Jimmie Williams “referred Members of Congress and congressional staff to the company’s VIP desk in California to create a favorable impression of the company on Capitol Hill. To better position himself to lobby Members and staff, Williams made sure they received enhanced customer service.”
A dozen legislators and staffers received 29 loans. Among the most important were Sen. Christopher Dodd (D-Conn.), chairman of the Senate Finance Committee; Sen. Kent Conrad (D-N.D.), chairman of the Senate Budget Committee; and Rep. Edolphus Towns (D-N.Y.), chairman of the House Oversight and Government Reform Committee. So were the current House Armed Services Committee Chairman Buck McKeon (R-Ca.) and Rep. Elton Gallegly (R-Ca.).
About the Author
Doug Bandow is a senior fellow at the Cato Institute. A former Special Assistant to President Ronald Reagan, he is the author and editor of several books, including The Politics of Plunder: Misgovernment in Washington (Transaction).
Letter to the Editor View all comments (17) | Leave a comment
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sharms| 7.23.12 @ 6:29AM
So.... what is going to happen to these criminals? And I say criminals because many instances in your letter showed emails etc confirming influence buying -- particularly the one about the mayor of Billings. The one who buys and the buyer both commit a crime. What is going to happen to them?
Scaramouche| 7.23.12 @ 7:16AM
Not a go#&amn; thing. 'Cause the first requisite, is they ALL cover each other's butts!
Bill Hussein O'Stalin| 7.23.12 @ 8:05AM
Our Congress has become 535 Osama Bin Ladens.
TLP| 7.23.12 @ 9:49AM
What is the Statute of Limitation on a RICO Charge?
The Crooked Son of a Crooked Father - Chris Dodd - shoulda been brought up on Racketeering Charges, Accepting Bribes, Graft, and Corruption Charges, for his Sweetheart Mortgage Rates from the CEO of a Company that did Business before His Committee, and that he KNEW was under Investigation, a long time ago. And, of course his Obama/Tony Rezko D.C. Condo deal, and his Irish Cottage, where he, and his Crooked WHORE of a Wife, can live out there lives, before going to Hell.
Then there's Massachusetts own Homo Whore House Proprietor - Barney Tea Bagger - and his Laundry List of RICO Offenses.
And, it's not just them. It's MOST of them.
And, until the Coroner starts making regular trips to the Capitol Building, to cart away the Garbage, this sh*t is never gonna end.
If they won't accept Term Limits, Legislatively?
Here's hoping there's someone out there who's Fed Up enough, to Term Limit them the Old Fashioned Way.
Otherwise, there will ALWAYS be 2 Americas.
One for them.
And a Lesser, Poorer one, for the rest of us.
dnha14| 7.23.12 @ 8:44AM
There will be no justice until Mozila is living in subsidized housing and driving a beater.
Anthony| 7.23.12 @ 9:00AM
Chris Dodd is still a hero to CT Democrats and the Hartford Courant, the paper that worked overtime to cover up his illegality.
However, even the Courant couldn't cover up the stinking rot of Doddism, and so Dodd quit after 30+ years of legislative destruction and plunder. The Courant is however, obsessed with Linda McMahon and the WWF. What a rotten way to make a living. The Courant has had stories from disguntled employees and former wrestlers, who have suffered injuries. No stone has been left unturned.
Yep, too bad Linda didn't make her money the honerable Democrat way, with fraud and graff. Or perhaps as the producer of Batman movies.
Of course, that income stream is reserved for Democrats only.
In a sane world, GITMO would be reserved for Dodd, Frank, Raines, Gorelick, and of course, Obozo and Holder from Fast & Furious.
But as we all know, Romney is hiding something......
TLP| 7.23.12 @ 9:53AM
And she doesn't have a Minor League Baseball Stadium named after a CROOKED, POS Father, either, like Sonny Boy, does.
Dodd Field.
What a Fckng DISGRACE!
SF Giants Fan| 7.23.12 @ 9:43AM
Good article. Unbelievable how corrupt some people are and can be!
However, you have an error in paragraph 5: Rep. Issa is from CA not MI.
Ryan| 7.23.12 @ 11:28AM
This goes further than the CRA and into the guarantees the government gives to the anti-free-market corporatist activities.
JD| 7.23.12 @ 12:05PM
This corruption is invited into Washington when government gets into the business of managing the economy. Eliminate government's ability to grant favors to business, and you'll eliminate the granting of favors by business to government. There is no other way.
JimH| 7.23.12 @ 12:57PM
JD, you are spot on. The important thing is to minimize the government’s role in the economy. What OWS and the like on the left fail to realize, while calling for new regulations, is that these laws are often tailor made by the larger members of the businesses they are intended to regulate. These rules serve as impediments to competition from smaller and less politically connected firms which cannot as readily absorb their cost while providing a smokescreen for the nefarious activities of the regulators and the allegedly regulated.
cicero| 7.23.12 @ 1:37PM
Just amazing! The collapse was not caused by the "housing market", but by the banks and the bankers using mortgage backed securities as poker chips to ganble with. But that is another story. What this article is about is corruption and how to stop it. While I don't think you can ever stop curruption, as long as the public treasury is available, I think you can give it pause. There has to be significant consequences for the deeds done. Someone has to go to jail, and ALL of their ill gotten gains seized and returnedd to the public treasury.
We have seen Washington assess fines in the hundreds of millions against corporation for real and imagined transgressions. We have also seen politicians and their friends be made to suffer minor inconvenience and embarrassments, while being allowed to keep millions and millions of dollars. Spare me. Only when they are jailed AND impoverished will this nonsense stop.
Crassus| 7.23.12 @ 3:09PM
Why did TAS have to run a picture of that POS Chris Dodd? I'd almost forgotten what he looked like. Damn, the man would steal anything that wasn't nailed down.
Bob Grant| 7.23.12 @ 9:33PM
Folks,
We are on the precipice of something nasty. Real, real nasty.
Four years after the most devastating financial meltdown since the Great Depression and what have we learned?
Not a damn thing!!!
In actuality, we've doubled down on what caused the crisis. Dodd/Frank legislation has assured the next big financial crisis (this fall) will only be survived by the large banks. The small and medium sized ones will be swallowed up in the next big financial disaster waves. Moreover, Fannie Mae, Freddie Mac-type loans were never reigned in.
This, coupled with new revelations that TARP inspector generals, the alleged "independent watchdogs", were on the take and seduced by the big banks to turn a blind eye on many of their questionable practices. The new book Bailout by Neil Barofsky catalogs one depressing story after another on the total corruption of our financial institution and the people responsible for regulating it.
Oh, and the overseas LIBOR scandal which could affect trillions of dollars of interest rates on loans. This could be the biggest scandal yet.
Cont...
Bob Grant| 7.23.12 @ 9:33PM
...Cont
So when the next big financial disaster rears it's ugly head and it becomes apparent the "watchdogs" were either incompetent or corrupt, and the same players (big banks, government officials, etc) were the driver of the disaster, what will be the reaction of an already hair trigger American public, when even more of their hard-earned money is pissed away at the hands of these criminals?
It's frightening to think what we could be in for.
ReaganConservative| 7.23.12 @ 10:16PM
Why is it that the slimy disgusting sleeze that permeates throughout Washington DC, never ceases.
There is just absolutely no integrity, professionalism, and ethics whatsoever in govt, whether yesterday or today, especially with Obama and the rest of his anti-American liberal socialist-marxists in power and office today..
This is what happens when govt officials become corrupt, and collude with corrupt elements to in both the private sector as well as the govt sector, enrich themselves at the tax payers expense.
This is why we have special prosecutors with special powers to go after these corrupt elements within govt and the private sector, if the current laws are not being adhered to, or if the laws have been stripped of any regulatory oversight to protect the people and the nation as a whole from such destructive plundering and looting of tax payer assets from corruption, graft, and greed.
What does it take to bring back sanity and professional integrity to govt.. We must rid these people from govt positions of power, via the ballot box, or impeachment, or congressional investigation and a congressional grand jury, and or a special prosecutor, whichever will best serve that task.
This is not a muti-trillion dollar tax payer joke. This will absolutely destroy our economic financial system, along with our Republic, if not fixed immediately upon the next Congress and President.