Saturday, May 30, 2009
Everybody Else Did It
...In February 2004, while Republican colleagues warned of the systemic risks posed by Fannie Mae and Freddie Mac, Mr. Dodd pronounced the mortgage market "one of the great success stories of all time." A year later, the Connecticut Democrat voted against a reform that would have limited the size of Fan and Fred's mortgage portfolios. Now that Fan and Fred have collapsed at a cost to taxpayers that could run to $200 billion or more, Mr. Dodd is also under fire for accepting sweetheart loans from Countrywide Financial, the subprime mortgage factory....
...Speaking of blame, another scheduled witness is Eugene Ludwig, who was Bill Clinton's Comptroller of the Currency in the 1990s. In 2000, Haverford College's magazine reported that "Ludwig remains proudest . . . of his efforts to compel bank compliance with fair-lending laws and his revitalization of the Community Reinvestment Act (CRA), a 1977 law requiring banks to invest in poorer neighborhoods and improve lending and service to low- and moderate-income borrowers. Although branded an 'activist' for his vigorous support of the act . . . he points to the cold, hard facts to justify his tactics. After just one Justice Department referral in the OCC's previous 129 years, Ludwig's tenure witnessed 27 fair-lending cases, resulting in tens of millions of dollars in fines against violators." Will he testify today that noneconomic loans were entirely the fault of bankers?...
Dodd and Countrywide
...Former Countrywide Financial loan officer Robert Feinberg says Mr. Dodd knowingly saved thousands of dollars on his refinancing of two properties in 2003 as part of a special program the California mortgage company had for the influential. He also says he has internal company documents that prove Mr. Dodd knew he was getting preferential treatment as a friend of Angelo Mozilo, Countrywide's then-CEO.
That a "Friends of Angelo" program existed is not in dispute. It was crucial to the boom that Countrywide enjoyed before its fortunes turned. While most of the company was aggressively lending to risky borrowers and off-loading those mortgages in bulk to Fannie Mae and Freddie Mac, Mr. Feinberg's department was charged with making sure those who could influence Fannie and Freddie's appetite for risk were sufficiently buttered up. As a Banking Committee bigshot, Mr. Dodd was perfectly placed to be buttered....
...Mr. Feinberg, who oversaw "Friends of Angelo" from 2000 to 2004, begs to differ. He told us that as the loan officer in charge he was supposed to make sure that the "VIP" clients knew at every step of the process that they were getting a special deal because they were "Friends of Angelo."
"People are referred into that department as 'very important people.' You're told that your loan is priced from Angelo. As the 'Friends of Angelo department,' [the department] has to give them a sense of importance and explain the reduction of fees and the rate as a result of being a 'Friend of Angelo,'" he says. According to a report by Dan Golden in Condé Nast Portfolio in August, other VIPs included Senator Kent Conrad. Mr. Golden reported that "Countrywide also offered special discounts to congressional staffers involved in housing issues."
As to Mr. Dodd, Mr. Feinberg says he spoke to the Senator once or twice and mostly to his wife and that like other FOAs Mr. Dodd got "a float down," which means that even after he had a preferred rate, when the prevailing rate dropped just before the closing, his rate was reduced again. Regular borrowers would pay extra for a last-minute adjustment, but not FOAs. "They were aware of it because they were notified and when they went to the closing they would see it," Mr. Feinberg says, adding that he "always let people in the program know that they were getting a very good deal because they were 'Friends of Angelo.'" All of this matters because Mr. Dodd was one of those encouraging Fan and Fred to plunge into "affordable housing" loans made by companies like Countrywide.
One indicator of his influence is the $165,400 in campaign contributions -- more than to any other politician -- that Fan and Fred have given him since 1989, according to the Center for Responsive Politics. These contributions are legal. But favors like those Mr. Dodd is alleged to have received may not be. Mr. Feinberg says he went public with his story because when he heard Senator Dodd on TV talking about predatory lending, he felt it was "hypocritical" and he says, "I just thought, 'This is wrong.'"...
