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.
FEINBERG: My conversations with Senator Dodd were maybe once or twice. It wasn't long conversations because he is a very busy person, but basically he came through a receptionist for one of the managers and I was given what to do with him as for discounts. I mostly spoke with his wife. So most of the work was done with his wife via e-mail or phone calls.
CARUSO-CABRERA: Can you definitely say that they knew they were getting better terms than they would have gotten otherwise?
CARUSO-CABRERA: No doubt in your mind?
FEINBERG: No doubt in my mind. When anyone entered on a phone call into the V.I.P. unit it wasn't just your job to provide them with discounts. It was your job to get the loan so you did explain where they were and how they were being treated and also that there was a lot of taglines that we used that the pricing was specially priced by [CEO] Angelo [Mozilo] and you're getting a better rate than a regular customer would get.
That was it. Feinberg recounted nothing, but he had no doubt in his mind about what Senator Dodd knew. Feinberg never considered that his phone taglines might sound like the shopworn marketing cliches. "Unless they asked, V.I.P. borrowers weren't told exactly how many points were waived on their loans," reported Portfolio. "I'm not clairvoyant," Dodd told the Associated Press. "There was no red flag to me that we were getting some special treatment."
Indeed, Senator Dodd got rates that were in line with the market. "You might get an adjustable mortgage that's locked in at 4 percent for five years and then it adjusts after that," said Ray Martin for Money Matters on CBS' The Early Show on June 12, 2003. On July 9, 2003, Dodd closed on a five-year adjustable rate mortgage with Countrywide at 4.25 percent.