Report: Subprime lender Countrywide won influence in Congress with discounts
Former Utah Sen. Bob Bennett's staffer among those who received loan discounts
Kevork Djansezian, File, Associated Press
WASHINGTON — The former Countrywide Financial Corp., whose subprime loans helped start the nation's foreclosure crisis, made hundreds of discount loans to buy influence with members of Congress, congressional staff, top government officials and executives of troubled mortgage giant Fannie Mae, according to a House report.
The report, obtained by The Associated Press, said that the discounts — from January 1996 to June 2008, were not only aimed at gaining influence for the company but to help mortgage giant Fannie Mae. Countrywide's business depended largely on Fannie, which at the time was trying to fend off more government regulation but eventually had to come under government control.
Fannie was responsible for purchasing a large volume of Countrywide's subprime mortgages. Countrywide was taken over by Bank of America in January 2008, relieving the financial services industry and regulators from the messy task of cleaning up the bankruptcy of a company that was servicing 9 million U.S. home loans worth $1.5 trillion at a time when the nation faced a widening credit crisis, massive foreclosures and an economic downturn.
The House Oversight and Government Reform Committee also named six current and former members of Congress who received discount loans, but all of their names had surfaced previously. Other previously mentioned names included former top executive branch officials and three chief executives of Fannie Mae.
"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 Angelo Mozilo. Those recipients were known as "Friends of Angelo."
The Justice Department has not prosecuted any Countrywide official, but the House committee's report said documents and testimony show that Mozilo and company lobbyists "may have skirted the federal bribery statute by keeping conversations about discounts and other forms of preferential treatment internal. Rather than making quid pro quo arrangements with lawmakers and staff, Countrywide used the VIP loan program to cast a wide net of influence."
The Securities and Exchange Commission in October 2010 slapped Mozilo with a $22.5 million penalty to settle charges that he and two other former Countrywide executives misled investors as the subprime mortgage crisis began. Mozilo also was banned from ever again serving as an officer or director of a publicly traded company.
He also agreed to pay another $45 million to settle other violations for a total settlement of $67.5 million that was to be returned to investors who were harmed.
The report said that until the housing market became swamped with foreclosures, "Countrywide's effort to build goodwill on Capitol Hill worked."
The company became a trusted adviser in Congress and was consulted when the House Financial Services Committee and Senate Banking Committee considered reform of Fannie and Freddie and unfair lending practices.
"If Countrywide's lobbyists, and Mozilo himself, were more strictly prohibited from arranging preferential treatment for members of Congress and congressional staff, it is possible that efforts to reform (Fannie and Freddie) would have been met with less resistance," the report said.
The report said Fannie assigned as many as 70 lobbyists to the Financial Services Committee while it considered legislation to reform the company from 2000 to 2005. Four reform bills were introduced in the House during the period, and none made it out of the committee.
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