GOP and Clueless Media Fan Flames of Phony Scandal

Mortgage products are confusing, which is why a "whistleblower" could bamboozle the press into believing that Chris Dodd saved $75,000 on mortgages from Countrywide Financial. Suzie Orman could have immediately explained why the correct amount is approximately zero. Senator Dodd made full disclosure last Monday, but the media narrative about Dodd's "sweetheart deals" seems to have stuck. Here's how a political scandal, a sort of mini-Whitewater, was contrived in the absence of credible evidence, and why the primary source of the revelations could be a Republican shill.

From his brief appearance on CNBC last summer, it was clear that Robert Feinberg was in over his head, less than honest, or both. Not that anyone noticed. Journalists heard what they wanted to hear, and filtered out the rest. Then the Senate Ethics Committee began investigating. And then, on October, 30, 2008, NBC News reported on a "wide-ranging criminal investigation" by Justice Department prosecutors into so-called sweetheart deals extended by Countrywide Financial.

Feinberg had come forward to expose the deals offered by Countrywide to high ranking public officials, celebrities and business executives. Before he was laid off, Feinberg had worked at a Countrywide call center in southern California, where he processed the paperwork on mortgages in the company's V.I.P. unit.

Countrywide's V.I. P. Program was large -- annual loan volume totaled hundreds of millions of dollars -- and it was not unique to Countrywide. "Among many mortgage lenders it was not an unusual practice to waive fees and waive certain underwriting guidelines if they had personal or business ties to the CEO or other senior executives," according to Chain of Blame, a book on the subprime mortgage industry. Clients in Countrywide's V.I. P. Program included Walter Cronkite, Stanley Tucci, the Chairman of KB Homebuilder and the Chairman of Sprint.

Before he left Countrywide, Feinberg took copies of loan documents for seventeen V.I.P.s, which included ten prominent Democrats and their relatives. These documents ostensibly constituted smoking gun evidence of corruption associated with a company embroiled in the mortgage crisis. But the evidence does not withstand scrutiny.

Selected details on loans extended to Senator Chris Dodd were revealed by Portfolio.com on June 12, at a critical juncture in Dodd's longstanding effort to bring his housing bill, intended to increase regulatory oversight on Fannie Mae and Freddie Mac, to a floor vote. "The controversy swirling around Dodd's and [Senator Kent] Conrad's VIP mortgages has cost Democrats crucial credibility on the issue as they compete with Republicans to portray themselves as the party most sympathetic to the plight of struggling homeowners," wrote the Associated Press on June 17. The controversy was more than a little ironic, given that Dodd had been a consistently staunch advocate for stronger regulation of the mortgage loan industry. On June 25, a group of nine Republican senators sent Harry Reid a letter, stating, "We request that you delay consideration until we have adequate time to read the bill and better understand the allegations and how much Countrywide will benefit from the bill." It would not be the first or the last time that Republicans would try to stall action on the mortgage crisis.

Only when Portfolio's August issue hit the news stand could anyone figure out the details which showed that Dodd's mortgages were in line with market terms. On July 21, when Feinberg appeared on CNBC's Squawkbox, Michelle Caruso-Cabrera cut to the heart of the matter:

 

CARUSO-CABRERA: Tell me about your conversations with Senator Dodd and exactly how this went down and how he got a cheaper loan than most people could get.

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