Were Countrywide's loans to lawmakers simply legal bribes?
It seems like rehashing ancient history to explore the topic of the Friends of Angelo (FOA) loans. You might recall those are the special mortgages that former Countrywide CEO Angelo Mozilo, the orange-faced Bronx butcher's son, gave to the powerful people who could help delay the day of reckoning for his mountains of sub-prime mortgages and other nefarious business practices.
Now we have a little he said/he said situation in Washington about two of those FOA loan recipients -- Senator Chris Dodd (D-CT) and Senator Kent Conrad (D-ND). Dodd and Conrad testified that they did not know they were part of Countrywide's "VIP" program. But Robert Feinberg, who worked as a loan officer at the House of Angelo, testified in June to a Congressional committee that Dodd and Conrad knew they were in the program.
Dodd issued a carefully worded statement which included the following: "Senator Dodd and his wife, Jackie, have demonstrated that they received market rates and terms on their loans. As they have said all along, they did not seek or expect any special rates or terms on their loans and they never received any." Conrad's office said, in part, he "never asked for, expected or was aware of loans on any preferential terms" and has "worked overtime to set the record straight."
Whatever. I am just wondering if Senator Dodd could help explain what was meant on Coutrywide loan documents which appeared to waive points -- upfront fees calculated as a percentage of the loan amounts -- on two loans Dodd got through the VIP Program. As AP reported, "The documents had separate columns: one showing points "actl chrgd" Dodd zero; and a second column showing "policy" was to charge .250 points on one loan and .375 points on the other."
This mess leaves me wondering what might have happened if the long arm of Mozilo had not tapped our lawmakers. Might they have done their jobs and kept financial institutions from issuing mortgages to people who could not repay them? Or would they have simply accepted sweetheart mortgages from Countrywide competitors?
We'll never know but we're still paying the price for what looks to me like a legal way to bribe our lawmakers.
Peter Cohan is president of Peter S. Cohan & Associates. He also teaches management at Babson College. His eighth book is You Can't Order Change: Lessons from Jim McNerney's Turnaround at Boeing.