Congress is now one step closer to uncovering the full scope of the collusion between reckless mortgage lenders and high-ranking government officials that ultimately inflated the U.S. housing bubble and brought the world economy to the brink of total collapse. One of the chief offenders in the mortgage meltdown was, doubtlessly, Countrywide Financial, a now-defunct corporate giant that exploited lax government policies to issue trillions of dollars in subprime mortgages on the guarantee that the burden of these toxic assets would ultimately fall on the shoulders of the American taxpayer.
For years, Countrywide’s successful strategy went undetected. Profits were good. The economy was booming. Everybody was happy.
And then, the bubble burst and the rains of economic hell began to fall on every American. At that point, Americans began wondering how Countrywide had managed to escape scrutiny. Then they began to learn about Countrywide’s VIP loan program that provided special deals and treatment for Members of Congress and other government officials who oversaw U.S. housing policy. Among the many who received the sweetheart deals were Sen. Kent Conrad (D-ND), Sen. Chris Dodd (D-CT), and former HUD Secretary Alphonso Jackson.
The mastermind behind Countrywide’s VIP loan program was its former CEO Angelo Mozilo, and the beneficiaries of Mozilo’s program became known as “Friends of Angelo.” The plan was simple: Countrywide would execute a strategic lobbying effort to purchase political favor with high-ranking government officials and other influential leaders who in turn could block attempts to reform the federal housing policies that hatched Countrywide’s trillion-dollar golden goose.
Until last week, it appeared that House Speaker Nancy Pelosi and Democrats in Congress were circling their wagons to block a full-scale investigation into the program, perhaps because some of Countrywide’s more notable VIPs were also Democratic Party VIPs. And then, in a commendable decision to break party ranks, two Democrats on the House Oversight Committee – Reps. Mike Quigley (D-IL) and Paul Hodes (D-NH) – joined Republicans and backed my call for a subpoena.
After months of mounting pressure, our committee finally prevailed upon my Democratic counterpart, Congressman Edolphus Towns (D-NY), to issue a wide-ranging subpoena to secure a majority of the records from Countrywide’s VIP Program. It was, to be sure, a complete reversal for Chairman Towns, who himself received a Countrywide VIP loan – albeit unwittingly, he has stated publicly.
The question of how Countrywide Financial sought to cultivate a network of political allies that could forestall congressional oversight and short-circuit needed reforms to government housing policies must be answered. The degree of collusion between Countrywide executives and CEOs at Fannie Mae and Freddie Mac must be determined. The scheme to grease the skids for Countrywide to unload their junk mortgages on Fannie Mae and Freddie Mac once they became unprofitable must be exposed.
Already, we have learned that Fannie Mae CEOs received their sweetheart loans from Mozilo’s VIP Program while they were simultaneously negotiating the terms of Fannie Mae’s financial relationship with Countrywide. This conflict of interest came at the ultimate expense of taxpayers, who are now on the hook for all of the mortgages that Fannie Mae purchased from Countrywide. Moreover, it is clear Fannie Mae’s and Freddie Mac’s record profits were made at the expense of the American people who provide the company’s implicit taxpayer guarantee. These profits were distributed to Fannie Mae and Freddie Mac executives in the form of exorbitant salaries and bonuses, but until now the full reach of the corrupt tentacles that extend between Countrywide, public officials and Fannie Mae and Freddie Mac has been elusive.
Clearly, growing public outrage and the threat of political embarrassment have provided an opportunity for a truly bipartisan investigation. As that investigation proceeds, it will be important for both Republicans and Democrats to remember one eternal truth about Washington politics: While the crime doesn’t get you, the cover-up will. Former political leaders had to learn this lesson the hard way, and while it appeared at first that some Congressional Democrats were content to repeat history, voices of reason prevailed. As Congressman Mike Quigley explained his decision to support the probe of Countrywide in an interview with the Wall Street Journal:
“The right thing to do is the smart thing to do.”