A growing number of Congressmen are demanding that votes be delayed on the new $300 billion housing relief legislation until hearings are held into a controversial mortgage loan program at Countrywide Financial involving alleged preferential treatment given to elected officials.
Countrywide (CFC) officials allegedly gave preferential treatment in mortgage loans, including float-down interest rates and shaving of points, to a select group of VIPs that included both Sens. Kent Conrad [D-N.D.] and Chris Dodd [D-Conn.], both of whom have denied any wrongdoing. Countrywide's controversial deals were given under the "Friends of Angelo" program, nicknamed after Countrywide chief executive Angelo Mozilo. Portfolio Magazine reported the allegations last week.
James Johnson, a former chief executive of Fannie Mae, resigned recently as an adviser to the presidential campaign of Sen. Barack Obama after the Wall Street Journal reported that Johnson received sweetheart loans from Countrywide. Johnson's lawyer has said those loans were made on normal terms.
House and Senate rules bar members from knowingly receiving gifts worth $100 or more annually from companies that use registered lobbyists. Countrywide's ethics code restricts executives, employees and board directors from improperly trying to influence government employees with money, gifts, loans, rewards, favors or anything of value.
The disclosures about the Countrywide program have sent members of Congress scrambling to defend themselves and assure voters that they did not receive preferential treatment in getting mortgages from Countrywide. Bank of America (BAC) is forging ahead to buy Countrywide in a deal now estimated to cost $3.3 bn. A special shareholder vote on its Countrywide purchase is scheduled for June 25.
Sen. Jim DeMint, [R-S.C.], has signaled he might try to block the housing measure due to the allegations.
"The housing bill has a multibillion-dollar taxpayer bailout for a company that reportedly gave preferential loans to members of Congress," a spokesman quotes the Senator as saying. "This is exactly the type of thing Americans are sick of."
Rep. Darrell Issa (R-) and Rep. Mark Souder also sent Rep. Henry Waxman (D-Calif.) a letter demanding hearings "on allegations that mortgage lenders may have made special deals with members of Congress," noting that "prominent people," including Senators Dodd and Conrad as well as "Fannie Mae CEOs Jim Johnson and Franklin Raines" allegedly received loans with preferential terms.
The two Congressmen are also asking that Rep. Waxman use his influence to "stop any legislation bailing out mortgage lenders until all tainted individuals have recused themselves, and the legislation has been examined and declared free of any undue influence."
In an exclusive interview on Fox Business, Rep. Issa demanded that the new $300 billion housing bill, which aims to help distressed homeowners and provide some relief to lenders, "be scrubbed" to ensure no conflicts of interest exist.
Rep. Issa was notably vocal earlier this year at a Congressional hearing looking into lucrative compensation given to bank executives at a time when taxpayers are losing their homes during the housing crisis. Testifying at the hearing were former Merrill Lynch top executive Stanley O'Neal, former Citigroup head Charles Prince, and Countrywide's chairman and chief executive Mozilo.
In a pointed exchange, Issa had said at the time that "this is a hearing in search of bad guys. Are there bad guys in front of me? I'm not seeing it," adding that the executives suffered alongside shareholders as the value of their stock in their companies plunged as well, despite the fact that these executives have been criticized for mismanaging their companies.
Rep. Issa and Rep. Souder addressed this issue in their letter, which noted that the loans, if true, "seem more egregious than the large compensation packages" the companies paid their CEOs and "deserve to be investigated with the same zeal as was the link of executive pay to the mortgage crisis."
Similarly, Rep. Jeb Hensarling (R-Texas) has called for hearings to determine whether members received "preferential treatment" with their mortgages "while millions of hardworking Americans struggle to repay their mortgage debts and cope with $4 [per] gallon gasoline and soaring foods prices," he noted in an open letter to Congressional colleagues.
Hensarling said he would request the hearings in a follow-up letter to House Speaker Nancy Pelosi (D-Calif.).
Newly released financial disclosure reports show at least a dozen House members also hold loans issued by Countrywide, according to the Washington, D.C. newspaper Roll Call. However, Roll Call is finding that most of the loans were given to these elected officials prior to their winning their elections to Congress.