In other headlines water is found to be wet, and the sun is hot. Seriously is anyone surprised that large corporations are using their money and resulting influence to try to influence our legislature? Just take a look at current tax policy, banking regulations, and any other law/policy that involves corporations today.
Well on to the details of this surprising news. A congressional report after a 3 year investigation by the U.S. House of Representatives’ Committee on Oversight and Government Reform, has concluded that Countrywide Financial Corp. provided members of Congress and other influential Washington policymakers with special deals on mortgages. They concluded that these deals were designed to reap political and financial benefits.
Countrywide had set up a VIP program called “Friends of Angelo” after then Countrywide CEO Angelo Mozillo, that gave low interest loans to government officials and legislaters. They used the loans to win influence with the lawmakers.
The program was reported to save the “VIP” members thousands of dollars by waiving upfront points and fees. According to the report these special deals were not available to the general public although the company claimed that they were made because these “high-profile customers, ‘quality and stability of employment’ can speak to the borrower’s ability to repay a loan.”
However, it appears that ability to repay was not a primary concern as VIP borrowers with bad credit scores, with low income or undocumented income also received the discounted loans. Leaving one to wonder what the company meant by ability to repay the loan.
It appears that the repayment plan was quite successful as the hundreds of loans it made to members of Congress, their congressional staff, high-ranking government officials, and executives of such entities such as Fannie Mae, yielded an exclusive agreement with Fannie Mae for them to sell billions of dollars in mortgages at a discounted rate, to the quasi governmental giant.
The report points out Countrywide made loan to the then CEO of FANNIE MAE Danial Mudd where Countrywide took a loss on a 3 million dollar mortgage. In order to make sure they were able to make the losing loan “Account executives were instructed to keep any derogatory information related to Mudd’s loan in-house, in order to avoid jeopardizing ‘any benefit we generate.'”
The report implies that such deals may have had an influence on the failure of 2005 GSE reform legislation, which if it had passed would have prevented the enormous growth in the subprime and Alt-A loan portfolios of Fannie Mae and Freddie Mac. That would have greatly reduced the financial meltdown, which is reported to have cost taxpayers between $220 billion and $311 billion.
The scariest part of this is one gets the sense that with politics today we could be playing a variation on the “Mad Libs” children books where we could just take various names of large corporations, instead of Countrywide, choose your purchase format such as super pac money instead of loan reductions, and then choose your purchased influence with the game having as many results as there are choices. The trouble is the corporations may win the game, but the American public, the everyday tax payer, is left with the bill for the book and its results.