Monday September 8, 2008

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Two Senators Appear to be "Friends of Countrywide"

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The loud "thud" you just heard over in the corner of the Senate hearing room was Senator Chris Dodd's vice presidential hopes hitting the wall.

The Senator was the second major political figure caught up in and possibly brought down by various aspects of the mortgage mess in general and Countrywide Financial in particular.

The Senator, a Democrat from Connecticut and Chairman of the Senate Banking Committee which regulates mortgage lending, was named in an article by Julie Hirschfeld Davis of the Associated Press and earlier by Conde Nast Portfolio magazine, as one of two senators - the other being Senator Kent Conrad (D - ND) - as having received preferential treatment from Countrywide CEO Angelo Mozilo in obtaining mortgage loans. Dodd had earlier this year called Countrywide's lending practices "abusive."

One week ago the allegation of a similar deal with Countrywide forced former Fannie Mae Chairman Jim Johnson to step down from his volunteer position as head of Barack Obama's vice presidential search team.

The three men were alleged to be participants in a special program for "friends" of Mozilo that awarded discounts and waived fees for those friends. Portfolio, citing internal Countrywide documents, said that the company made two loans to Dodd in 2003, shaving three-eights of a point off of a $506,000 loan to refinance a townhouse in Washington. The discount saved Dodd about $2,000 in interest payment. A second loan to refinance a house in Connecticut was written at a quarter point off the going rate, saving the Senator about $700 a year.

Conrad, who said he was referred to Mozilo by Jim Johnson, received a one point discount on orders of Mozilo which saved him about $10,000 per year on a $1.07 million mortgage used to purchase a vacation home in Delaware. According to the Associated Press, Countrywide also made an exception in lending Conrad $96,000 in 2004 to buy an 8-unit apartment building in spite of its policy of only providing loans for buildings of four units or fewer.

"They said they frequently made exceptions, especially for good customers," Conrad said.

An internal e-mail from Mozilo, however, said the exception was "due to the fact that the borrower is a senator," according to the Portfolio report.

Both Dodd and Conrad denied that they knew they were getting special treatment from the lender and Conrad stated that he had never met Mozilo but the Wall Street Journal said that while the two may not have met face-to-face, it was Conrad who called Mozilo and asked for a loan.

The Journal also said that Conrad has offered to make a charitable contribution for the amount of his estimated mortgage savings, over $10,000, to make the current controversy go away. According to the newspaper, "So while the Senator says he did nothing wrong, now that his non-mistake has been discovered, he will nonetheless give away the nonspecial treatment cash. There is ample evidence here to warrant an investigation, including subpoenas for relevant documents.

"The same goes for Senator Christopher Dodd (D., Conn.), who chairs the very Banking Committee responsible for drafting the laws that govern Countrywide's market. Mr. Dodd is still in denial mode, but so far no one has knocked down the Portfolio.com story that he received discounted loans as part of Countrywide's "Friends of Angelo" program."

Fannie Mae buys more home loans from Countrywide than from any other of its business affiliates. According to its most recent report to the Securities and Exchange Commission Fannie called Countrywide its "top customer," accounting for approximately 28 percent of Fannie's single-family business by volume last year - 2 percent more than in 2006.

Again quoting the Journal article; "In the week since the Journal revealed this program, the key questions have become clear: What did Countrywide CEO Angelo Mozilo receive - or think he would receive - in return for the friendly loans to politicians? And what did Mr. Mozilo get - or think he would get - in return for sweetheart loans to Fannie Mae CEOs Jim Johnson and Franklin Raines?

One thing is certain, given presumed Presidential nominee Barack Obama's stated insistence that his campaign will not be run by or accepting donations from lobbyists, it is unlikely that the idea of a sweetheart deal between a major corporation and government bigwigs is going to work in favor of any of the latter who harbor vice presidential or cabinet aspirations. One just has to wonder how deep and how wide Countrywide has infiltrated the entire political process.