Friday, 13 July 2012 00:00
Barclays’ interest-rate manipulation scandal has generated headlines but less attention has been paid to the Capitol Hill figures that benefited financially when Countrywide Financial Corp. did something comparable on their behalf.
How Countrywide Used its VIP Loan Program to Influence Washington Policymakers, a report prepared for Rep. Darrell Issa (R-California), chairman of the U.S. House of Representatives’ Oversight and Government Reform Committee, was released July 5 and offers an eye-opening window into D.C.’s world of crony capitalism.
“The foremost benefit of being a Countrywide VIP [Very Important Person] was access to discounted loans in the form of waived points. The standard reduction was 0.5 points. Countrywide routinely waived junk fees typically ranging from $350 to $400 for VIP borrowers,” the report stated.
The document’s sections about former U.S. Senator Christopher Dodd (D-Connecticut), retiring U.S. House Rep. Edolphus Towns (D-Brooklyn), and former Fannie Mae Vice Chairman Jamie Gorelick, who grew up in Great Neck, have received comparatively little media coverage and that’s why I’m detailing here their alleged interactions with Countrywide, a now-defunct lender purchased by Bank of America in 2008.
Recognizing that his personal dealings with Countrywide, while chairman of the U.S. Senate Banking committee, would be highlighted during a 2010 campaign, then-U.S. Senator Christopher Dodd (D-Connecticut) retired at the end of that year.
“When [Senator] Dodd refinanced the mortgage for his East Haddam, Connecticut home in the summer of 2001, [Angelo] Mozilo [Countrywide’s CEO] again ordered the VIP unit to apply discounts. In an email on June 28, 2001, Mozilo ordered the VIP unit to apply the “employee discount” to Dodd’s loan. He [Mozilo] knocked off a half point, waived garbage fees, instructed the loan to be processed with minimal documentation, and ordered the loan approved,” the U.S. House report stated.
Rep. Edolphus Towns (D-Brooklyn), another Countrywide VIP customer, is also retiring from Congress at the end of this year, having decided against seeking re-election. Rep. Towns sent a letter to his fellow Oversight and Government Reform committee members in September 2009, according to last week’s report. In that correspondence, then-Chairman Towns characterized Countrywide’s VIP program “as enhanced customer service, in a manner similar to airline frequent flier programs or supermarket discount cards.” The U.S. House’s investigators found, however, that VIPs with low credit scores, low or undocumented income, and other negative loan characteristics received discounted loans from Countrywide. In fact, the Countrywide VIP team ignored Rep. Towns’ low credit score in order to process his loan quickly, the report states.
Ms. Gorelick, vice chairman of Fannie Mae between 1997 and 2003, had Countrywide’s CEO knock 1.875 points off her $960,000 Countrywide loan, “which translated into an $18,000 discount,” the U.S. House report stated. This transaction occurred while Fannie Mae was responsible for purchasing a large volume of Countrywide’s subprime mortgages and accepting this discount likely violated Fannie Mae’s code of conduct, the U.S. House document notes.
GSEs (government-sponsored enterprises), such as Fannie Mae, suffered billions of dollars in losses and were placed into conservatorship by the federal government in 2008 under the weight of widespread defaults by subprime borrowers. The U.S. taxpayer was, and remains, there to bail out the GSEs but when will any institution ask Dodd, Towns and Gorelick to account for their actions?
Mike Barry, a corporate communications consultant, has worked in government and journalism. Email: MFBARRY@optonline.net