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Special Report
Countrywide Corruption on Capitol Hill
The report is on the sleaziest mortgage lender of them all.
(Page 2 of 2)
Dodd became known as the “Senator from Countrywide” and decided not to seek reelection in 2010. He had pushed legislation to relieve mortgage lenders of responsibility for some $300 billion in bad loans. The Washington Examiner, noted the committee, quoted anonymous Senate staffers who said “the bailout section is exactly what Bank of America and Countrywide wanted. It’s obvious they got that they asked for.”
Numerous important staffers — who, in fact, typically draft legislation — also benefited from Countrywide’s largesse. For instance, reported the committee: “Countrywide gave VIP loans to congressional staff who played a role in policy discussions that affected Countrywide. Staff with connections to the committees of jurisdiction for mortgage industry issues in the House and Senate received VIP loans from Countrywide.”
For years Fannie Mae and Freddie Mac fought against any reform proposals. “Countrywide buttressed the efforts of Fannie’s lobbyists by connecting with key staffers through the VIP program,” reported the oversight committee. One example: “Documents show Countrywide enrolled House Financial Services Committee Staff Director Joseph Ventrone…. Countrywide gave a discounted loan to a staffer in the office of Rep. Ruben Hinojosa, who has served on the Financial Services Committee since 2001.”
The company did not neglect its friends in the executive branch. Stated the committee report: “Countrywide also had favorable relationships with key decision makers in the Executive Branch. Two former Secretaries of Housing and Urban Development received VIP loans — Alphonso Jackson and Henry Cisneros. The VIP unit processed Cisneros’s loan after he joined the company’s Board of Directors. Jim Johnson referred former Secretary of Health and Human Services Donna Shalala to the VIP unit.” Mozilo asked his employees to ensure that they “knock her socks off’ with their service to Shalala.
The company was extraordinarily sensitive to political questions. Top employees cited borrowers’ political connections when recommending VIP treatment. One internal email noted: “this is a Congressman, we must get his 3 day package out on time.” A lobbyist passed on one request, noting: “I would put this one in a ‘moderate VIP’ status — the Hill staffer is very important to us, the loan is for his sister and her husband, who he described as ‘novice first time refinancers’.” When the brother-in-law of a committee staffer sought to refinance his mortgage, the same lobbyist noted that “The aide is a big supporter of Countrywide and called me to see if we could help out. Hence the referral to you!”
The issue came up about resolving a complaint by Montana mayor Chuck Tooley. Sidney Lenz, a Countrywide employee, observed in an email: “I’m usually in favor of settling on the side of the borrower with political influence; however, in this case, I think the mortgage insurance payment for the life of the loan has the potential of being a greater number than the mayor of Billings, Montana, influence.” Lenz went on to ask the opinion of an employee who worked with mayors.
Countrywide also used VIP loans to buy friends at Fannie Mae, which inflated the housing market, encouraged the subprime lending craze, and required a large-scale federal bail-out. A prime beneficiary of Countrywide’s largesse was Fannie Mae CEO Jim Johnson, who despite earning millions annually, had a poor credit rating. Nevertheless, Mozilo instructed worried underwriters to provide a below prime loan: “Jim Johnson continues to be a source of many loans for our company and this is just a small token of appreciation for the business that he sends to us.”
In fact, reported the committee:
Countrywide gave Johnson special treatment to a greater extent than it did for any other VIP borrower. Mozilo made sure Countrywide went to great lengths to reward Johnson for his personal and professional relationship with the company. Johnson received the full suite of benefits from Countrywide’s VIP unit — from keeping Johnson’s purchase of a condominium in the Ritz Carlton secret from his wife so he could surprise her, to giving discounted loans to his son and his maid, to ignoring credit issues and debt ratios when Johnson’s loans did not comply with lending standards.
Johnson’s successor, Franklin Raines, who was forced out in an accounting scandal, received five Countrywide loans. Countrywide even took a loss on the loan to former Fannie Mae president and CEO Daniel Mudd because doing so, explained the committee report, “was expected to eventually generate a benefit for the company.” Moreover, most every other Fannie Mae employee enjoyed special treatment. Explained Issa: “Other than Countrywide, no other entity’s employees received more VIP loans than Fannie Mae. Even as Countrywide’s CEO Mozilo mocked Fannie Mae and top executives for its crony capitalism business model, he would nonetheless personally intercede to ensure executives had access to discounted Countrywide loans. These relationships helped Mozilo increase his own company’s profits while dumping the risk of bad loans on taxpayers.”
The economic and political merged for Countrywide. The company won a volume discount from Fannie Mae in return for not working with Freddie Mac. It was a “unique” relationship, noted the committee, since “there was not a general industry practice of giving a volume discount to a mortgage originator.” Countrywide’s partnership with Fannie Mae was economically profitable — at least until the housing crash.
Equally important, Countrywide and Fannie Mae together fought against any reform of federal housing subsidies. Observed the committee report: “Fannie Mae and Countrywide lobbied against government-sponsored enterprise (GSE) reform legislation that would have diminished Fannie Mae’s ability to acquire and hold subprime mortgages originated by Countrywide. Countrywide also lobbied against predatory lending bills.”
Fannie Mae was one of Capitol Hill’s 800-pound-guerrillas. Its role was detailed in Gretchen Morgenson and Joshua Rosner’s Reckless Endangerment: How Outsized Ambition, Greed and Corruption Led to Economic Armageddon. Morgenson later said that Johnson “is a person who really, really wrote the blueprint for how to neutralize your regulator, how to manipulate Congress to get your way and, you know, essentially how to destroy your critics.”
Countrywide joined in Fannie Mae’s broad campaign to loot the taxpayers for the benefit of the housing industry. After Fannie Mae was crippled politically by its de facto bankruptcy, Countrywide was still there. Stated the committee: “When Fannie Mae dissolved its lobbying network under congressional pressure, Countrywide stepped in to fill the breach.”
The cost of not reforming the GSEs was enormous. As 2011 ended, taxpayers had spent $183 billion to bail out Fannie Mae and Freddie Mac. By 2014 the total cost is expected to run between $220 billion and $311 billion.
There were many contributing causes to the 2008 financial crisis, but the most important was the housing crash. That had a disproportionate effect on the rest of the economy because of the activities of the GSEs — aided and abetted by irresponsible private lenders, such as Countrywide. The latter company alone did not alone stop Congress from acting before disaster hit, but by showering legislators with gifts Countrywide discouraged congressmen from exercising even minimal oversight. The taxpayers ended up the big losers.
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.