Remember Countrywide and their VIP loan program?But far from being dismantled, Fannie and Freddie have avoided insolvency, thanks to massive taxpayer bailouts. Talk of winding them down has faded on Capitol Hill and is being discouraged by the Obama administration. The two entities, along with the Federal Housing Administration, currently back some 90 percent of new mortgages. Talk about there being no consequences for failure.
At least Countrywide had to be sold to Bank of America in 2008; and two years later, Countrywide’s disgraced CEO, Angelo Mozilo, had to pay a $22.5 million fine, the largest ever at that time for a senior executive of a public company, for insider trading and concealing information on Countrywide’s deteriorating mortgages.
But Mozilo avoided criminal charges and to date has never satisfactorily explained Countrywide’s infamous “Friends of Angelo” program, which provided discount mortgages and other benefits to numerous executives at Fannie and Freddie as well as executive-branch officials and up to 30 members of Congress and their staffers. Countrywide wouldn’t have thrived or been allowed to go off the ethical rails without lots of “friends” in government.
Representative Darrell Issa (R., Calif.), chairman of the House Government Reform and Oversight Committee, issued a report last July concluding, among other things, that Countrywide lobbyists would frequently refer members of Congress and their staff to the company’s VIP desk so they could receive “enhanced customer service.” E-mail evidence was found showing that specific requests for personal loans were made to the VIP desk and quickly facilitated. Issa’s committee found that more than six current and former lawmakers — including retiring Senate Budget Committee chairman Kent Conrad, a North Dakota Democrat, and House Armed Services Committee chairman Buck McKeon, a California Republican — obtained mortgages through the Countrywide VIP program.
Countrywide’s most famous client was Democratic senator Chris Dodd, chair of the Financial Services Committee from 2006 to 2010. Although he and Conrad were cleared of ethics violations by the Senate Ethics Committee in 2009, Dodd retired the next year after it became clear that revelations about his involvement with Countrywide had destroyed his political standing in his home state of Connecticut. He was nonetheless able to shepherd the now-infamous Dodd-Frank bill into law before he stepped down. Dodd-Frank is a rat’s nest of new regulations on financial firms, but it goes notably light on regulating the housing industry and its cozy relationship with the federal government.
Despite its explosive findings, Representative Issa’s committee lacked any jurisdiction to suggest punishment for any individuals. The matter was handed off to the secretive House Ethics Committee, which quietly issued a report just two days after Christmas. This report concluded:
While these allegations concern serious matters, almost all of the allegations concerned actions taken outside, or well outside, the jurisdiction of this Committee . . . because they occurred before the third Congress prior to the current Congress. In addition, several of the Members and employees mentioned in the allegations are no longer serving in or employed by the House, and therefore are outside the Committee’s jurisdiction.
Can we finally stop pretending Congress has our best interests at heart?