There's an old saying: If you want a friend in Washington, get a dog. We can now add to that, "or become chairman of the Senate banking committee." Senator Chris Dodd is one of the lucky legislators revealed last week to have taken part in a special lending program for "Friends of Angelo." That's Angelo Mozilo, president of Countrywide Financial. Dodd saved about $75,000 by getting a loan through the exclusive "Friends of..." program. Sweet deal!
But that's nothing compared to what Countrywide's hoping to get out of it. Dodd, in his capacity as the banking committee chair has spent the last few months boisterously pushing a $300 billion bailout of mortgage lenders. Basically, the deal would allow lenders to cherry pick their worst loans and offload them onto the FHA, meaning taxpayers would shoulder the risk for lenders' bad bets (CBO predicts that more than a third of the loans picked up by the FHA are likely to default). And one of the biggest beneficiaries of the bailout would be – surprise, surprise – Countrywide Financial.
Now, Dodd, of course, maintains that he's only trying to help struggling homeowners. Images of working-class folks, slaving away to keep their modest homes come to mind. But considering the cap on eligible mortgages will likely be upwards of $600,000, that doesn't seem to be the case. Instead, it looks like the intersection of bad policy, bad politics, and the most obvious Washington cronyism imaginable.
To illustrate the point, a few of my young colleagues recently visited the Capitol Hill rowhouse which Dodd refinanced through the Countrywide program. And they brought a panda with them.