Democrats lock Republicans out of committee room — Hit the Road Jack: Oversight Democrats Run Away From Countrywide Bribe Program Vote Video — Friends of Angelo: Countrywide’s Systematic and Successful Effort to Buy Influence and Block Reform Staff Report — PHD Real Estate Home Loans 101 by Virginia Bravo Countrywide Video) — It still reeks — Ray Charles – Hit The Road Jack (Live 1981) Video
The Hill – By Susan Crabtree
Rep. Edolphus Towns (D-N.Y.) locked Republicans out of the House Oversight and Government Reform Committee room to keep them from meeting when Democrats aren’t present.
Towns’ action came after repeated public ridicule from the leading Republican on the committee, Rep. Darrell Issa (R-Calif.), over Towns’s failure to launch an investigation into Countrywide Mortgage’s reported sweetheart deals to VIPs.
For months Towns has refused Republican requests to subpoena records in the case. Last Thursday Committee Republicans, led by Issa, were poised to force an open vote on the subpoenas at a Committee mark-up meeting. The mark-up was abruptly canceled. Only Republicans showed up while Democrats chairs remained empty.
Republicans charged that Towns canceled the meeting to avoid the subpoena vote. Democrats first claimed the mark-up was canceled due to a conflict with the Financial Services Committee. Later they said it was abandoned after a disagreement among Democratic members on whether to subpoena records on the mortgage industry’s political contributions to Republicans.
A GOP committee staffer captured video of Democrats leaving their separate meeting in private chambers after the mark-up was supposed to have begun. He spliced the video to other footage of the Democrats’ empty chairs at the hearing room, set it to the tune of “Hit the Road, Jack” and posted it on the Oversight and Government Reform Committee’s minority webpage, where it remained as of press time.
Towns’s staffers told Republicans they were not happy about the presence of the video camera in the hearing room when they were not present. Issa’s spokesman said the Democrats readily acknowledged to Republicans that they changed the locks in retaliation to the videotape of the Democrats’ absence from the business meeting even though committee rules allow meetings to be taped…]
Democrats Committee Members:
Chairman, Edolphus Towns, New York
Rep. Paul E. Kanjorski, Pennsylvania
Rep. Carolyn B. Maloney, New York
Rep. Elijah E. Cummings, Maryland
Rep. Dennis J. Kucinich, Ohio
Rep. John F. Tierney, Massachusetts
Rep. Wm. Lacy Clay, Missouri
Rep. Diane E. Watson, California
Rep. Stephen F. Lynch, Massachusetts
Rep. Jim Cooper, Tennessee
Rep. Gerry Connolly, Virginia
Rep. Mike Quigley, Illinois
Rep. Marcy Kaptur, Ohio
Rep. Eleanor Holmes Norton, District of Columbia
Rep. Patrick Kennedy, Rhode Island
Rep. Danny Davis, Illinois
Rep. Chris Van Hollen, Maryland
Rep. Henry Cuellar, Texas
Rep. Paul W. Hodes, New Hampshire
Rep. Christopher S. Murphy, Connecticut
Rep. Peter Welch, Vermont
Rep. Bill Foster, Illinois
Rep. Jackie Speier, California
Rep. Steve Driehaus, Ohio
Friends of Angelo:
and Successful Effort to Buy
Influence and Block Reform
U.S. House of Representatives
Committee on Oversight and Government Reform
Darrell Issa, Ranking Member
March 19, 2009
- With Countrywide-originated loans serving as fuel and Government-Sponsored Enterprises (“GSEs”) Fannie Mae and Freddie Mac acting as a furnace, the alliance of the companies created an enormous fire that eventually consumed the American economy. Many of the people in position to reform the GSEs and extinguish the flames before the danger spread were receiving perquisites from a VIP loan program operated by Countrywide under the supervision of Chairman and CEO Angelo Mozilo. These included Fannie Mae Chief Executive Franklin D. Raines and two Senators with legislative jurisdiction over the issues at the heart of the emerging financial crisis – Christopher Dodd and Kent Conrad.
- To augment its voice in the GSE-reform debate, Countrywide dispensed favors to VIPs who it believed might be worthwhile to the company. This group of borrowers included legislators, congressional staffers, lobbyists and other opinion leaders. Countrywide also distributed benefits to business partners, local politicians, homebuilders, entertainers and law enforcement officials. Countrywide’s voice was heard in the debate on Capitol Hill about reforming the GSEs. When reform was considered by the 108th Congress, Members publicly expressed faith in Fannie and Freddie. Congressman Barney Frank (D-MA), for example, described them as “not facing any kind of financial crisis.” He was wrong.
- Countrywide’s VIP loan program was a tool with which the company built its relationships withMembers of Congress and Congressional staff. It was also a tool it used to protect its relationship with Fannie Mae. Senior Countrywide officials as well as the company’s lobbyists openly and explicitly weighed the value of relationships with potentially influential borrowers against the cost to Countrywide in terms of forfeited fees and payments. Preferential treatment for these potentially influential borrowers, the most important of whom were referred to internally as “Friends of Angelo,” was part of an expansive effort by Countrywide to “ingratiate [Countrywide] with people in Washington who might be able to help the company down the road.”
- Countrywide loan officers waived fees and knocked off points for VIP borrowers at no cost, amounting to thousands of dollars in savings. For VIPs, Countrywide fast tracked the loan process and ignored their own documentation policies. Countrywide customers ordinarily paid hundreds of dollars in upfront fees. Not the VIPs. Regular customers paid one percent of the total amount of the loan to reduce the interest rate by one point. But not the VIPs.
- When Congress considered reform of the GSEs, the company hoped their “Friends of Angelo” would respond. Fannie and Freddie reform legislation was never passed, let alone voted on by Congress.
- Borrowers whose loans were processed by Countrywide’s VIP loan unit were aware they received preferential treatment. Countrywide VIP account executive Robert Feinberg testified VIP loan officers explicitly communicated to “Friends of Angelo” they were receiving special pricing and preferential treatment. Documents obtained by the Committee confirm this. VIP borrowers were informed Angelo Mozilo priced their loans personally and they relied on their status as “Friends of Angelo” to guarantee preferential treatment for themselves and others. In case borrowers had any doubt about which department was processing a loan, Countrywide loan officers attached business cards to loan documents clearly indicating the officers processing the loan worked in the VIP unit.
- Accepting the discounts made exclusively available to “Friends of Angelo” violated applicable ethical rules for certain VIP borrowers. Senate rules prohibit acceptance of loans at discounted rates not available to the general public. The Fannie Mae Code of Conduct applicable to directors and executives bars any gift made in order to influence behavior, especially when accepting such a gift appears to create a conflict of interest.
- Involvement in the VIP loan program casts a cloud of suspicion over the actions – or in many instances non-actions – of those charged with policy-making, legislative, or oversight responsibility for the mortgage industry and the GSEs. The scope and intent of the “Friends of Angelo” and other VIP programs at Countrywide Financial Corporation represent a systematic attempt by the mortgage giant to gain favor from those entrusted to protect the public’s interests through oversight and regulation of the home mortgage industry.
- In 1999, Fannie Mae CEO Jim Johnson and Countrywide CEO Angelo Mozilo reached a strategic agreement giving Fannie Mae exclusive access to many of the loans originated by Countrywide in exchange for a discount on fees Fannie charged when buying loans. The agreement linked the growth and success of Countrywide to Fannie Mae’s continued desire to acquire a large volume of loans.
- Fannie Mae’s strategy to acquire and hold a large volume of mortgages betrayed its congressionally-mandated mission to increase access to home ownership. This strategy, which relied on the GSEs’ borrowing advantages and may have been motivated by a desire to reach earnings levels to trigger executive bonuses, exposed Fannie Mae to increased risk. Fannie Mae’s new direction fundamentally changed the home lending industry, encouraging originators like Countrywide to aggressively market subprime loans.
- Because the growth and success of Countrywide was tied directly to Fannie Mae’s continued hunger for acquiring and holding loans and Wall Street’s continued investment in mortgage-backed securities composed of subprime mortgages, Countrywide CEO Angelo Mozilo offered a key group of VIPs preferential treatment through a special loan division. Countrywide gave preferential treatment to legislators, Congressional staff, cabinet members, Fannie Mae executives, lobbyists, and others wellconnected in Washington. Countrywide also gave preferential treatment to business partners, local politicians, homebuilders, entertainers and law enforcement officials.
- At the same time the “Friends of Angelo” VIP loan program was affording preferential treatment to Members of Congress, Congressional staff, and lobbyists, Congress was considering legislation to reform the GSEs. The most notable reform effort died in the Senate Banking Committee, where Senator Christopher Dodd was a member. Reform legislation was never passed, let alone voted on by Congress.
- Countrywide’s VIP loan program was a tool with which Countrywide built its relationship with Congress and protected its relationship with Fannie Mae. Senior Countrywide officials and lobbyists openly and explicitly weighed the value of relationships with potentially influential borrowers against the cost to Countrywide in terms of forfeited fees and payments.
- Countrywide’s Washington lobbyist Jimmie Williams identified influential borrowers for VIP treatment. Williams justified his referrals to the director of the VIP program by explaining the borrower’s position and how he or she could be valuable. Among others, Williams referred the Chief Counsel to the House Financial Services Housing and Community Opportunity Subcommittee Clinton Jones, HUD SecretaryAlphonso Jackson’s daughter Annette Watkins, U.S. Rep. Melvin Watt’s Chief of Staff Joyce Brayboy, and former Democratic National Committee official and Director of White House Political Affairs under President Clinton Minyon Moore.
- Countrywide loan officers waived fees and knocked off points for VIP borrowers at no cost, amounting to thousands of dollars in savings.
- Countrywide charged non-VIP borrowers hundreds of dollars in upfront fees. Non-VIP borrowers paid one percent of the total amount of the loan for an interest rate reduction of one point. In many cases, Countrywide facilitated and expedited the loan process for VIPs by ignoring company policies.
- Countrywide’s internal software calculated rates for borrowers based on established industry criteria, including loan-to-value ratio, debt-to-income ratio, and credit history. If the terms of a loan violated company policy, the software would instruct the loan officer to “correct and resubmit.” Countrywide loan officers performed manual overrides to apply the reduced rates specified by Angelo Mozilo. Manual overrides were also necessary to breach company policy in order to accommodate VIP borrowers.
- Angelo Mozilo personally specified rates and fees for VIP borrowers. When the terms of a VIP loan violated Countrywide policy, Mozilo was notified and would personally authorize overrides. Mozilo substituted his familiarity with and the reputation of VIP borrowers for credit checks and reviews of debt and assets. According to the documents, no VIP borrower was ever given anything less than an “A-paper” loan.
- Countrywide VIP account executive Robert Feinberg testified it was the practice of VIP loan officers to communicate to “Friends of Angelo” they were receiving special pricing and preferential treatment. Documents obtained by the Committee confirm this. VIP borrowers were informed Angelo Mozilo personally priced their loans and they relied on their status as “Friends of Angelo” to guarantee preferential treatment for themselves and others. Borrowers previously processed through the VIP department expected discounts on subsequent refinances. In case a borrower had any doubt about which department was processing a loan, Countrywide loan officers attached business cards to loan documents clearly indicating the officers processing the loan worked in the VIP unit.
- Senators Christopher Dodd and Kent Conrad received discounted loans from Countrywide. By waiving fees and reducing rates, Countrywide saved each Senator thousands of dollars. The loans made to the Senators were processed by the Countrywide’s VIP loan program and they were identified as “Friends of Angelo.”
- Countrywide CEO Angelo Mozilo organized a deliberate and calculated effort to establish relationships with key participants in the GSE-reform debate by affording decision-makers and other influential opinion leaders preferential mortgage loan terms. This effort was successful.
- His friends, who were known inside of Countrywide as “Friends of Angelo,” in many instances returned the favor. In Congress, for example, legislation adverse to Countrywide’s interests was blocked. At Fannie Mae, Chief Executive Franklin D. Raines – a “Friend of Angelo” – adopted strategies that assisted the continued growth of Countrywide.
- Some of the people in Congress and at the GSEs who were in the best position to diagnose and prevent a colossal failure of the mortgage industry were targeted by Countrywide for special handling.
- Members of Congress and leaders of GSEs are explicitly prohibited from accepting gifts and discounts for precisely this reason. Effective oversight requires objectivity, and forging a relationship with and accepting preferential treatment from a major stakeholder in the outcome of a reform effort compromises objectivity.
- The gift and disclosure rules applicable to Congress do not merely prohibit quid pro quo exchanges of gifts in exchange for specific action. The rules prohibit accepting any gifts to avoid the appearance of a quid pro quo expectation. The rules are restrictive because the stakes are high. In this case, the health of the American economy was at stake.
- We now know the economy was not adequately protected by some of the very people who could have made a difference – several influential “Friends of Angelo.”
New Post – By PAUL GREENBERG Last Updated: 7:58 PM, August 21, 2009
Gosh, what a surprise: A committee of their fellow senators has decided that Chris Dodd and Kent Conrad did nothing unethical when they took out loans from Countrywide Financial on the kind of favorable terms not available to mere mortals without their financial or political standing — or a personal connection to the head of Countrywide.
The very Select Committee on Ethics did recognize that the whole deal looked bad, and gave its colleagues a gentle pat on the wrist for creating “the appearance that you were receiving preferential treatment based on your status as a senator.” But in the end, one hand washed the other, if not very well.
The senators on the committee have a point: This VIP program — called Friends of Angelo after Angelo Mozilo, the head of Countrywide at the time — seems to have been open to a wide, bipartisan range of politicians with pull as well as anybody Mozilo took a liking to.
To name a select few: A former housing secretary (Alphonso Jackson), a former secretary of health and human services and later university president (Donna Shalala), a former assistant secretary of state and still-diplomat (Richard Holbrooke), an adviser to Barack Obama’s presidential campaign (James Johnson) and so prominently on.
How else could these preferential loans appear but improper?
Just because something is legal doesn’t make it right. When a senator is told he’s getting a favor, like a point off his interest rate, that ought to be enough to raise a warning flag — and keep him from accepting the deal.
Countrywide cast a wide net for its favoritism, but just how wide may never be known. It seems the chairman of the House Oversight and Government Reform Committee is refusing to issue a subpoena for Countrywide’s records of just who got these VIP loans and why. The committee chairman, it turns out, is one Edolphus Towns (D-Brooklyn), who himself received a couple of loans from Countrywide. What a coincidence.
Towns denies getting any special treatment, but without a look at Countrywide’s records, how can the public be assured of that? If he has nothing to hide, why isn’t he going after the records that would vindicate him?
Don’t expect him to answer such questions until, like Dodd and Conrad, public pressure forces him to. The loan officer at Countrywide who was in charge of such loans testified that both senators knew very well they were getting special treatment. Indeed, that it was standard practice to tell recipients of such loans they were getting a preferred rate.
Well, sure. What’s the point of doing influential people a favor if they don’t know about it? Let it be noted that Countrywide didn’t just give Dodd a VIP loan; it also contributed some $20,000 to his political campaigns.
Dodd now has acknowledged that he should have leveled with the public sooner about his relationship with Countrywide — “I think [my silence] contributed to people’s cynicism and distrust that maybe I wasn’t telling the truth . . .” Ya think?…]
Just Wrong !!!
Washington Times: Dodd reaped campaign cash from AIG
SF Gate: BofA to Pay $4.1B to Buy Countrywide
Politico: Panel sends Countrywide subpoena
Updated Related Links – end