July 12, 2012
Our View: Legalized bribery
The Joplin Globe
If there’s a difference between bribery and what Countrywide did in the decade leading up to the housing crisis, we can’t see it.
Countrywide’s lending practices helped bring on the economic downturn, and all the while that the company was making these subprime (risky) loans, it offered other loans at discounted rates and waived fees to key people in Washington who were in a position to help Countrywide and its allies.
Former Senate Banking Committee Chairman Christopher Dodd, D-Conn., got a low-interest loan. So did Senate Budget Committee Chairman Kent Conrad, D-N.D., and former Housing and Urban Development secretaries Alphonso Jackson and Henry Cisneros; and former Health and Human Services Secretary Donna Shalala.
According to a new U.S. House of Representatives investigative report, the discounted VIP loans began in January 1996 and continued through June 2008, when the company was acquired by Bank of America. These sweetheart deals were not just aimed at gaining influence for the company itself, but were made also to benefit Fannie Mae. According to reports, Countrywide’s business depended largely on Fannie Mae, which was responsible for buying a large volume of Countrywide’s loans, including the subprime loans. At the time that Countrywide was buying its influence — legally — Fannie Mae was trying to fend off more government regulation.
“Documents and testimony obtained by the committee show the VIP loan program was a tool used by Countrywide to build goodwill with lawmakers and other individuals positioned to benefit the company,” the report said. “In the years that led up to the 2007 housing market decline, Countrywide VIPs were positioned to affect dozens of pieces of legislation that would have reformed Fannie” and its rival Freddie Mac, the committee said.
Some of the discounts were ordered personally by former Countrywide Chief Executive Officer Angelo Mozilo.
“These relationships helped Mozilo increase his own company’s profits while dumping the risk of bad loans on taxpayers,” the report said.
In short, Countrywide used its influence to buy regulators, legislators and others at the expense of the American people.
Five years later, there have been no criminal prosecutions. Not one banker or official with this or other companies has gone to jail, although some have paid fines and been banned from working in the industry again. That was hardly a punishment, given that they escaped with millions. Some of these compliant members of Congress quietly retired, but others have been re-elected. That’s because all of this is legal. Therein lies the heart of the scandal.
Nothing has fundamentally changed between Washington and Wall Street, so expect more of the same in years to come.
“Countrywide’s effort to build goodwill on Capitol Hill worked,” the report concluded.
Yes, but for whom?