Countrywide VIP Loans Went to Key Lawmakers: Congressional Report

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Mark Wilson / Getty Images

Angelo Mozilo, founder and former CEO, Countrywide Financial Corporation

When people ask why banking CEOs haven’t been called to account for the devastating mortgage meltdown that helped plunge the United States into the worst recession in generations, a name that invariably comes up is Angelo Mozilo, the former CEO of Countrywide Financial. On Thursday, his name surfaced again, after a Congressional committee released a report detailing how Countrywide provided sweetheart mortgage loans to powerful members of Congress. The results of the three-year Congressional investigation have renewed attention on one of the more notable influence-peddling schemes in recent memory, and could revive questions about why the well-tanned Mozilo hasn’t spent any quality-time in the slammer.

Prior to the financial crisis, Countrywide Financial was one of the largest mortgage lenders in the country, specializing in risky subprime loans, which it offered to people with less-than-sterling credit. According to Mozilo’s TIME 2007 Person of the Year citation, the mortgage chieftain “pushed his sales force to write risky loans long after alarm bells began sounding, and took home staggeringly large paychecks.” From 2000 though 2008, Mozilo received total compensation of over $500 million.

(More: Countrywide’s Angelo Mozilo: Center of the Mortgage Mess)

Countrywide, which enjoyed revenue of $11.4 billion in 2006 as the real-estate bubble neared its peak, was purchased by Bank of America in January of 2008 for the fire-sale price of $4.1 billion as part of the financial crisis mop-up.

The Congressional report released Thursday found that between 1996 and 2008, Countrywide’s VIP loan unit operated a “Friends of Angelo” program that made hundreds of loans to current and former members of Congress, congressional staff, and other high-ranking government officials. The VIPs received discounted mortgage rates and faster loan processing.

Meanwhile, some of the lawmakers and staff who received the VIP loans were “positioned to affect” legislation that Countrywide opposed. “In fact, Countrywide lobbyists – and CEO Angelo Mozilo himself – referred several Members and staff from the Senate Committee on Banking and the House Committee on Financial Services to the VIP unit,” the Congressional report found. The “Friends of Angelo” unit processed loans for key Senators and Senate staff “who could be helpful when legislation that affected the company was drafted or up for a vote.” Among the lawmakers named in the report:

Countrywide gave VIP loans to former Senate Banking Committee Chairman Christopher Dodd; Senate Budget Committee Chairman Kent Conrad; and Mary Jane Collipriest, Communications Director for former Senator Robert Bennett, who served on the Banking Committee. Dodd referred Collipriest to the VIP unit.

Countrywide also forged relationships with Members and staff of the U.S. House of Representatives. The VIP unit processed loans for Congressmen Howard “Buck” McKeon; Pete Sessions; Edolphus Towns; and Elton Gallegly.

The Congressional report could not find a single instance of quid pro quo directly connecting a lawmaker’s vote to a sweetheart deal, according to Rep. Jason Chaffetz, a Utah Republican and member of the Committee on Oversight and Government Reform, which produced the report. “But it skirts awfully close,” Chaffetz told CNN’s AC360 on Thursday evening. “You couldn’t just pick up the phone or go down to your local Countrywide representative and get this,” he added. “You could only get it by dealing with the ‘Friends of Angelo.’”

(More: Big Problems for Sens. Dodd and Conrad: Updated With Conrad Response)

The Capitol Hill VIP program spread through Congress in part because “congressional staffers complained about their Countrywide mortgages to the company’s lobbyist,” according to The Wall Street Journal. All the lawmakers named in the report have denied wrongdoing. Several provided lengthy statements to CNN. Committee chairman Darrell Issa, the California Republican, has no plans to file an official complaint with the House Ethics Committee, his spokesperson told The Washington Examiner.

For his part, Mozilo made TIME‘s Person of the Year list in 2007. The citation wasn’t flattering. In 2010, Mozilo settled securities fraud and insider trading charges with the SEC by agreeing to a $67.5 million fine and a lifetime ban on serving as an officer or director of any public company. (Countrywide footed $20 million of the bill.) The fine was a fraction of Mozilo’s overall compensation, as Gretchen Morgenson of The New York Times reported at the time of the settlement:

For years, Mr. Mozilo was among the highest-paid executives in America and his S.E.C. fine is a fraction of the vast wealth he amassed running Countrywide. In one eight-year period, from 2000 until he left the company in 2008, Mr. Mozilo received total compensation of $521.5 million, according to Equilar, a compensation research firm.

Further reading: Countrywide’s “Friend of Angelo” VIP loan program was first detailed in Dan Golden’s 2008 Condé Nast Portfolio cover story. (I worked at Portfolio at the time; it was a big scoop. Portfolio closed in 2009, and many of the links to its stories have been lost. But an archived version of Golden’s story can be found here.)

PHOTOS: The Tale of a Lost Mortgage

14 comments
Rick Fitzgerald
Rick Fitzgerald

AT says has it right! Democracy at its best. Both sides benefited from sweetheart deals. Someone should file a report on which member of Congress has defaulted on a home loan and I'll bet you a nickel we can find the same kind of consumer fraud as home owners have been accused of committing. The bigger story is how BOA came about buying this mess of a company. It was a result of the Feds wheeling and dealing behind the scenes to have a bank  take them over so that the losses wouldn't take down the banks who had so much exposure to them. BOA didn't have much choice as they were essentially blackmailed into going through on the merge.

Ohwoahisme
Ohwoahisme

Mozilo and a whale of a lot of mortgage brokers should have been locked up for the shoddy underwriting of bad paper, but when you have the government not only encouraging free credit, but guaranteeing it as well, who are you going to lock up first?

AT
AT

Democracy at its best.

Thomas
Thomas

I couldn't find in the article where any congressional VIPs were named.  Who where accepting bribes, payments to turn a blind eye to what Angelo was up to?  Whoever they were why aren't they being indicted, arrested, fined and jailed.  It seems to me they are still getting a sweetheart deal.

jason024
jason024

"Committee chairman Darrell Issa, the California Republican, has no plans to file an official complaint with the House Ethics Committee, his spokesperson told The Washington Examiner."

And he was going to clean up the government well......only when it benefits him politically. What a shocker.

Ohwoahisme
Ohwoahisme

He isn't filing an ethics complaint because it's a waste of time.  People on both sides of the aisle got sweet deals from Countrywide, but not any sweeter than non government employees got.  You can assume they voted whereever they could in rulings benefiting clearing houses like Countrywide, but you can't prove it, and you can't show that the deals they got were better than deals given to the general public.  They've already looked into it.  It's the same as Holder's comtempt of Congress vote.  Nothing will come of it.

John Luma
John Luma

The rich and powerful always take care of their own. It's a circle of protection that also makes them feel they are part of The Club. 

Eric Dukat
Eric Dukat

I'm not surprised that Countrywide did this, it's business. I'm not surprised Congresional staffers did this, they're politicians with a sense of entitlement. I am surprised there seems to be no enforcement or punishment for such actions that isn't controlled by the same people that benefit from such corruption. Broken.

CoachPhil
CoachPhil

As silly as this expression is, this is a perfect example of the "fox guarding the hen house."  It only seems predictable that until Americans elevate their valuations of integrity over "wealth at any cost" these sorts of behaviors will persist with increasing frequency.

Tommy3134
Tommy3134

 Senator McConnell etal must have been on the receiving end of one or more of these mortgages.