From the Ramparts
Junious Ricardo Stanton
Connecting The Dots To Another Major Tax Payer Rip Off
“Details are murky, but Senator Dodd appears to want to spend many billions on a new federal agency to buy-up undefined “distressed” mortgages at less than their original value.Suppose Mr. Jones has a $300,000 mortgage on a house now worth $250,000. The new agency would offer to pay off the loan for $250,000 and then let Jones stay in the house with a new $250,000 mortgage that would then be guaranteed by the Federal Housing Authority (which ultimately means the U.S. taxpayer). FHA would debase its customary lending standards. If banks and mortgage service companies are willing to write-off a large part of the value of some mortgages, why would we need to put U.S. taxpayers at risk? Why couldn’t each borrower simply negotiate a new contract, as hundreds of thousands have already done (though usually for a lower interest rate rather than forgiveness of principal). If a home owner or speculator like Mr. Jones could get a smaller mortgage through a government agency by not making payments and threatening to default, that would create a huge moral hazard. His neighbors would resent his special treatment, and threaten to default on their loans too.” Creating A National Mortgage Scandal http://www.cato-at-liberty.org/2008/01/24/creating-a-national-mortgage-scandal/
Recent revelations that US Senator Christopher Dodd was given preferential treatment securing two mortgages sheds additional light on the incestuous and parasitic relationship our congressional representatives have with special interests: Wall Street, big business, large banks and corporations. Senator Dodd just happens to be the chairman of the Senate Banking and Finance Committee. Dodd’s committee also just happens to be working on legislation that supposedly will resolve the mortgage crisis currently spreading throughout the US which is also negatively impacting global financial conditions. So here we have several US senators who are members of the Senate Banking Committee who were given sweet deals by the nation’s largest subprime mortgage lender Countrywide Financial which would “coincidentally” benefit from the legislation they are working on. The corporate media mentioned it for one day only because a magazine named Portfolio did a story on Countrywide’s former CEO Angelo Mazilo who was under FBI investigation and recently was indicted on charges of fraud. Of course there was no follow up in the mainstream media and the story blew over within a few days. No sense making more of this than it really is especially since the good senator Dodd a former candidate for the Democratic presidential nomination pooh poohed the revelation saying it was no big deal, that he didn’t see it as a conflict of interest.
Yeah right! Maybe it’s me but this certainly doesn’t pass the smell test. There is an appearance of impropriety here at least and at worst a major conflict of interest. When you dig deeper you find things really don’t smell good. “If Dodd, indeed, got special treatment from Countrywide, this is a huge deal. As chairman of the Banking Committee, Dodd has been an outspoken critic of lenders during the mortgage crisis. He's proposed criminal penalties for predatory lending and has moved to ban prepayment penalties and other loan features that were common during the housing boom - features that Countrywide frequently employed in its lending practices. He's also leading an effort for a mortgage rescue plan, and is widely respected by consumer activists. Countrywide, once the nation's largest subprime lender, imploded last year as the mortgage market collapsed, and has become the symbol for excessive and irresponsible lending. Others getting loans through the VIP program include former Housing and Urban Development Secretary Alphonso Jackson, former Health and Human Services Secretary Donna Shalala, and former U.N. Ambassador and assistant secretary of state Richard Holbrooke.” washingtonindependent.com/view/the-subprime-hall-of shame
Despite Dodd’s assurances he wasn’t aware he was getting preferential treatment from Countrywide Financial, that he and his wife shopped around with other lenders, they merely took the best deal, something is rotten about this. What do we expect Senator Dodd to say, “Yeah I got hooked up. Everybody does it, so what?” No, he and his people were going to spin it as harmlessly as possible. Nevertheless this is a serious ethics issue as the Portfolio piece points out, “According to company documents and emails, the V.I.P.'s received better deals than those available to ordinary borrowers. Home-loan customers can reduce their interest rates by paying ‘points’—one point equals 1 percent of the loan’s value. For V.I.P.'s, Countrywide often waived at least half a point and eliminated fees amounting to hundreds of dollars for underwriting, processing and document preparation. If interest rates fell while a V.I.P. loan was pending, Countrywide provided a free ‘float-down’ to the lower rate, eschewing its usual charge of half a point. Some V.I.P.'s who bought or refinanced investment properties were often given the lower interest rate associated with primary residences. Unless they asked, V.I.P. borrowers weren’t told exactly how many points were waived on their loans, the former employee says. However, they were typically assured that they were receiving the ‘Friends of Angelo’ discount, and that Mozilo had personally priced their loans. The V.I.P. loans to public officials in a position to advance Countrywide’s interests raise legal and ethical questions. Countrywide’s ethics code bars directors, officers and employees from ‘improperly influencing the decisions of government employees or contractors by offering or promising to give money, gifts, loans, rewards, favors, or anything else of value.’ Federal employees are prohibited from receiving gifts offered because of their official position, including loans on terms not generally available to the public. Senate rules prohibit members from knowingly receiving gifts worth $100 or more in a calendar year from private entities that, like Countrywide, employ a registered lobbyist.” http://www.portfolio.com/news-markets/top-5/2008/06/12/Countrywide-Loan-Scandal
What’s more troubling is that Dodd’s committee is working on legislation that will in all probability pass the mortgage problem onto US taxpayers. As I’ve said in previous articles the mortgage crisis is a virtually a redo of the Savings and Loan Scandal whereby the crooks, shysters and con men get off Scott free while US taxpayers are stiffed with the clean up bill. What’s even more alarming is, Dodd received campaign contributions from Bank of America which purchased Countrywide Financial. The bailout bill will benefit banks like BOA which are hemorrhaging mightily due to the collapse of the housing market and the ongoing credit crisis exacerbated by the abrupt burst of the housing, mortgage and lending bubbles.
“But Dodd's troubles are growing, and may eventually wind up killing the mortgage bailout bill he co-authored with Alabama Republican Senator Richard Shelby. A new examination of Dodd's campaign contributions reveals that since Dodd became chairman of the Banking Committee in 2007, he has received over $70,000 in contributions from Bank of America and its high-level employees. Bank of America recently bought Countrywide Financial and all of its existing loans. Since Countrywide held the most sub-prime mortgages at risk of default, Bank of America is potentially exposed to huge losses, unless a government bailout moves those risky loans off Countrywide's balance sheet. Dodd has written such a bailout, and some are now questioning whether his low interest loans and Bank of America's campaign money influenced that legislation.” news.aol.com/political-machine/2008/06/20/dodd-mortgage-bailout-bill-under-fire/
The ol’ quid pro quo, something for something. Dodd gets a break on two (not one but two) mortgages plus generous campaign contributions from Bank of America which just happened to buy Countrywide Financial and we are expected not to see anything nefarious in this? Keep in mind BOA has billions of dollars in bad loans on its books as well as the books of Countrywide Financial which it recently acquired. To add insult to injury it is rumored Bank of America actually wrote the Bailout Bill. “Those following the progress of the Dodd-Shelby mortgage rescue plan in the Senate might want to check out two solid pieces of enterprising reporting on the bill this weekend. First, the Examiner's Tim Carney reports that the bailout section of the Dodd-Shelby bill is, in the words a lobbyist, ‘exactly what Bank of America and Countrywide wanted.’ Is there a connection between Bank of America and Sen. Christopher J. Dodd (D-Conn.)? There is. Carney: ‘Bank of America's political action committee (PAC) has donated $20,000 to Dodd since he became chairman of the banking panel 17 months ago. From January 2007 to March 2008, Bank of America employees have donated at least $50,400 to Dodd's campaigns, according to the Center for Responsive Politics.’ National Review's the Corner follows up, citing an internal Bank of America document: ‘National Review Online has obtained an internal Bank of America ‘discussion document’ (PDF here) on the subject of the FHA Housing Stabilization and Homeownership Retention Act of 2008, a.k.a. the Dodd-Shelby mortgage-lender bailout bill .... This discussion document (dated March 11, 2008) would appear to support the contention that BofA essentially wrote the bailout section of the bill.’ Faithful readers of the blog will remember that Bank of America has been pushing hard for a big federal intervention for months. This was from a New York Times story on BofA's lobbying efforts back in February: ‘ Bank of America suggested creating a Federal Homeowner Preservation Corporation that would buy up billions of dollars in troubled mortgages at a deep discount, forgive debt above the current market value of the homes and use federal loan guarantees to refinance the borrowers at lower rates.’ ‘'We believe that any intervention by the federal government will be acceptable only if it is not perceived as a bailout of the bond market,’ the financial institution noted. In practice, taxpayers would almost certainly view such a move as a bailout.’” Did Bank of America Write the Dodd Bailout Bill? http://latimesblogs.latimes.com/laland/2008/06/did-bank-of-ame.html
Keep in mind the key component in this part of the bill is risky loans will be written off the lender’s books (in this case Bank of America) for any amount above the real value of the home, (meaning the banks would be bailed out of loans where the houses have devalued below the original mortgage; which is almost all of them) then Fannie Mae, Freddie Mac and FHA who are backed by taxpayer guarantee would get into the act. They would take on these loans by buying the high risk loans already held by the banks and become the new lenders for people who cannot afford the home they already have. What this means is eventually the banks (bond holders, bond rating companies, mortgage companies and investors etc) who created this mess in the first place ,will be saved the ignominy of legal liability, collapse and bankruptcy! Guess who ends up paying if and when these loans default? You got it, Us; the taxpayers as in suckers.
Connect the dots: Banking Committee members Dodd and Kent Conrad get preferential treatment, they subsequently "write" legislation whereby the banks get out from under onerous losses and the taxpayers get stuck with the bill. The mainstream media is not talking about this at all, at least not on the front pages or in the headlines on Cable or network news. It’s the same ol’ same’. Dodd and Conrad are proving this is the best Congress money can buy.