On December 22, 2008, Congressman Darrell Issa's staff interviewed Robert Feinberg, the fabulist "whistleblower" who accuses Chris Dodd and other Democrats of receiving "sweetheart deals" on their home mortgages with Countywide Financial. Feinberg's statements, plus the confidential company documents that he stole and handed over to Issa, represent the only direct evidence used in Issa's 63-page report, "Friends of Angelo: Countrywide's Systematic and Successful Effort to Buy Influence and Block Reform." Issa released his report, which he falsely characterized as a work product of the House Oversight Committee, on March 19, 2009.
Nothing in Issa's March 2009 report suggests that his findings are preliminary or incomplete. It states:
Countrywide VIP account executive Robert Feinberg testified it was the practice of VIP loan officers to communicate to "Friends of Angelo" they were receiving special pricing and preferential treatment. Documents obtained by the Committee confirm this. VIP borrowers were informed Angelo Mozilo personally priced their loans and they relied on their status as "Friends of Angelo" to guarantee preferential treatment for themselves and others. Borrowers previously processed through the VIP department expected discounts on subsequent refinances. In case a borrower had any doubt about which department was processing a loan, Countrywide loan officers attached business cards to loan documents clearly indicating the officers processing the loan worked in the VIP unit.
Any journalist who had done his homework would have questioned Issa about his decision to have Feinberg do a rerun of his testimony in secret last month. Issa chose to have Feinberg testify one day before testifying for the Senate Ethics Committee, three months after Issa's report was completed, and six months after Feinberg first testified the same information for Issa.
In other words, any competent reporter would have questioned whether Feinberg's testimony to Issa was, in fact, real news. Any journalist with common sense would have suspected that Issa's intent was to create a media distraction at a critical juncture of legislative negotiations, and would have addressed such a possibility in his reporting. Larry Margasak of the Associated Press left readers with the impression that Feinberg's testimony was brand new information.
Margasak's unacknowledged rehashing of Feinberg's testimony touches on the real scandal surrounding the Countywide VIP loan story. He and other mainstream reporters are unwilling to report facts that undercut the false premise of their narrative. It's as if they recount demands to investigate Obama's birth certificate, but they never bother to read the actual birth certificate.
To recap for those who are unaware, the claim that Dodd and Conrad got "sweetheart deals," i.e. deals better than those available to anyone else on the open market, is a lie told by a liar, Robert Feinberg, touted by another liar, Darrell Issa, and being disseminated by some mainstream enablers like Margasak, who writes:
House Democrats have declined to subpoena available records that might reveal whether other members of Congress got discounted VIP mortgages from subprime lender Countrywide Financial Corp. similar to the sweetheart deals given Democratic Sens. Chris Dodd and Kent Conrad.
Republicans say they are willing to risk that the records now held by Bank of America may show that GOP lawmakers were also "friends of Angelo" who got preferential terms on personal mortgages at the behest of then-Countrywide CEO Angelo Mozilo.
To understand why Issa's effort is a complete sham, you need read his report. It soon becomes apparent that he lies about everything, sort of like Liz Cheney on steroids. Unfortunately, Margasak takes his claims at face value.
Maybe some day I'll get around to refuting every one of Issa's deceptions, but for the time being here's a brief sampling:
Lie 1: "Documents confirm" that "Borrower Awareness of VIP Status."
Take that passage above, which says that VIP loan officers told customers that they got special pricing and preferential treatment, and "Documents obtained by the Committee confirm this." First of all, the "Committee" doesn't have those documents; no Democratic member of the House Oversight Committee has anything related to Issa's unilateral effort. Second, the documents presented by Issa confirm no such thing.
Issa claims that Feinberg's business cards, which said that he worked in the VIP loan unit, confirm that customers were told they were receiving "special pricing and preferential treatment," (terms so vague in the context of business and finance as to be meaningless). No kidding. The business card "confirms" what Feinberg said to Dodd. How stupid does he think we are?
According to a Connecticut reporter who viewed Dodd's loan documents, a "Countrywide document generated on April 23, 2003 had the business card of Robert Feinberg, a senior account executive with Countrywide, Xeroxed to the page and another page had: *VIP FOA* written on it."
You can't make this stuff up.
Lie 2: Franklin Raines got a "one point discount and waiver of junk fees" because of his assistant's phone call.
Here's another fabrication used to malign Franklin Raines, the former CEO of Fannie Mae. In June 2003, Countywide CEO Angelo Mozilo told Raines that he needed to refinance his mortgage, which had just been refinanced in April 2003. The reason was obvious; rates were falling dramatically. According to an average benchmark published by HRH, rates on 10-year adjustable mortgages fell about 80 basis between April 18, 2003 and June 13, 2003.
Raines' assistant, Wendy Hogan, left a phone message with someone at Countrywide named Doug Perry. "Wendy stated that per Angelo, Frank needs a refi." Issa writes:
In response to Wendy Hogan's phone call, Doug Perry arranged a one point discount and waiver of junk fees on Raines's June 2003 refinance. According to the documents, the discounts ordered by Perry were applied to the June 2003 loan. The rate for the loan was 4.125 percent, exactly one point less than the initial rate of 5.125 percent applied to the loan being refinanced (Raines's April 2003 mortgage).
False. In response to Hogan's phone call, Doug Perry arranged a refi. There is zero evidence that Wendy Hogan or Franklin Raines had any knowledge of how the pricing was determined or that the terms were set because of the call. According to Portfolio's reporting, Raines got no discount on the interest rate of his refi. It was one percent lower than his April mortgage, which, given the decline in the underlying Treasury index, would be within market parameters. In other words, there was no discount applied to the loan rate. Issa lied about that. Raines paid no points on the refi, "one waived" said Portfolio, though the most plausible explanation would be that the reduced paperwork and documentation for a refi on a loan that closed three months earlier makes the waiver appropriate. But here's the kicker:
Lie 3: "According to the Wall Street Journal, the market average rate for comparable loans at the time of Mr. Raines' June 2003 refinance was 5.1 percent."
In order to accuse Raines of being dishonest and in order to claim Raines got a one percent discount on his interest rate, Issa misquotes the Wall Street Journal, which had a disclaimer that effectively nullified the 5.1 percent rate:
A comparison of the Fannie Mae officers' terms with interest rates prevailing when they got their loans raises the possibility Countrywide gave them preferential terms. But it's impossible to tell for sure from public documents. An array of other factors also can account for lower-than-average rates, including a borrower's income, total assets and credit score; how big the loan is compared with the home's value; and how many "points" a borrower may have paid upfront in order to get a lower rate.
In other words, as I wrote in June 2008, they don't know jack. The author of that story, Glen Simpson, played along with Issa's charade nine months later, when, on March 5, 2009, Simpson wrote, "The records appear to contradict Mr. Raines's Dec. 8 statement to the panel that he was 'unaware of any special treatment,' Mr. Issa says in his letter." Simpson knew Issa was being dishonest because Simpson knew he was being misquoted. Issa's letter says:
Documents produced by Mr. Raines to the Committee show that the discounts ordered by Perry were in fact applied to the June 2003 loan. The rate for that loan was 4.125 percent, exactly one point less than the initial rate of 5.125 percent applied to Mr. Raines' April 2003 loan. According to The Wall Street Journal, the market average rate for comparable loans at the time of Mr. Raines' June 2003 refinance was 5.1 percent.
Lie 4: Conflating Fannie Mae, the subprime mortgage industry, the financial crisis and Countrywide's VIP loan program.
Issa's Executive Summary provides the overarching theme, which is a perversion of history. He wants to conflate Fannie Mae with the subprime mortgage industry, and fool people into believing that problems that emerged while Republicans controlled Congress and the White House should be laid at the Democrats' doorstep.
Issa, who in 2007 opposed laws that would have protected homeowners from predatory lenders, wants to persuade others that Dodd, who has never wavered in his advocacy of strict financial regulation, played a part in the mortgage meltdown based on false allegations that Dodd got a better-than-market deal on his mortgage.
With Countrywide-originated loans serving as fuel and Government-Sponsored
Enterprises ("GSEs") Fannie Mae and Freddie Mac acting as a furnace, the alliance of the
companies created an enormous fire that eventually consumed the American economy.
Many of the people in position to reform the GSEs and extinguish the flames before the
danger spread were receiving perquisites from a VIP loan program operated by
Countrywide under the supervision of Chairman and CEO Angelo Mozilo. These
included Fannie Mae Chief Executive Franklin D. Raines and two Senators with
legislative jurisdiction over the issues at the heart of the emerging financial crisis --
Christopher Dodd and Kent Conrad.
To augment its voice in the GSE-reform debate, Countrywide dispensed favors to
VIPs who it believed might be worthwhile to the company...
Countrywide's voice was heard in the debate on Capitol Hill about reforming the
GSEs. When reform was considered by the 108th Congress, Members publicly expressed
faith in Fannie and Freddie. Congressman Barney Frank (D-MA), for example, described
them as "not facing any kind of financial crisis." He was wrong.
Countrywide's VIP loan program was a tool with which the company built its
relationships with Members of Congress and Congressional staff. It was also a tool it
used to protect its relationship with Fannie Mae.
First of all, the GSEs imposed strict underwriting and documentation standards on their mortgages. What "fueled the fire," or inflated the bubble, was the absence of market discipline brought on subprime and other non-GSE financings. Subprime lending took off in 2004, before then it was an insignificant part of the market. (It was less than 5% of Countrywide's loan production in 2003, when Dodd obtained his mortgage. It multiplied in subsequent years.) Second, it was the Republicans, not the Democrats, who failed to negotiate enhanced regulation of the GSEs. Third, Barney Frank said the the GSEs were not facing not facing any kind of financial crisis in 2003, before the real estate bubble had taken off. At that time, Frank's assessment was correct. Finally, Issa's insinuation that Frank or any Democrat opposed regulation of the GSEs is dishonest.
Barney Frank, with characteristic eloquence and restraint, put it best;
I do not argue that we are facing a vast right-wing conspiracy. What we are dealing with is something, however, equally troubling. It is crass right-wing mendacity. It is systematic dishonesty, lying, distortions, misrepresentations, bad history being promulgated.
That's what the Countrywide VIP loan scandal is all about.
For a recap on the history of the mortgage meltdown see this and this.