We continue to discover how much wider and deeper the tentacles of the Countrywide Financial Corporation VIP program reached. As was widely reported last month, some 153 Fannie Mae employees reaped Countrywide VIP benefits. That’s in addition to the 30 VIP loans that went to other Senators and their employees besides corruptocrat Democrat Sen. Chris Dodd and North Dakota Democrat Sen. Kent Conrad.
Gretchen Morgenson at the NYT reports on an internal document shedding more light on the intimate, favor-trading relationship between Countrywide and Fannie Mae:
Outwardly, Fannie and Freddie wrapped themselves in the American flag and the dream of homeownership. But internally, they were relentless in their pursuit of profits from partners in the mortgage boom. One of their biggest and most steadfast collaborators was Countrywide, the subprime lending machine run by Angelo R. Mozilo.
Countrywide was the biggest supplier of loans to Fannie during the mania; in 2004, it sold 26 percent of the loans Fannie bought. Three years later, it was selling 28 percent. What Countrywide got out of the relationship was clear — a buyer for its dubious loans. Now the taxpayer is on the hook for those losses.
But what was in it for Fannie?
An internal Fannie document from 2004 obtained by The New York Times sheds light on this question. A “Customer Engagement Plan” for Countrywide, it shows how assiduously Fannie pursued Mr. Mozilo and 14 of his lieutenants to make sure the company continued to shovel loans its way.
Nine bullet points fall under the heading “Fannie Mae’s Top Strategic Business Objectives With Lender.” The first: “Deepen relationship at all levels throughout CHL and Fannie Mae to foster alignment and collaboration between our companies at every opportunity.” (CHL refers to Countrywide Home Loans.) No. 2: “Create barriers to exit partnership.” Next: “Disciplined Risk/Servicing Management” and “Achieve Fannie Mae Profitability Goals.”
(Later in 2004, by the way, the Securities and Exchange Commission found that Fannie had used improper accounting and ordered it to restate its earnings for the previous four years. Some $6.3 billion in profit was wiped out.)
The engagement plan also recommends ways that Fannie executives should mingle with Countrywide’s top management, because “fostering more direct senior level engagements with key influencers throughout their organization will be beneficial in ensuring strategic alignment and building organizational loyalty.”
House Oversight and Government Reform ranking member GOP Rep. Darrell Issa reacts:
Rep. Darrell Issa (R-CA), Ranking Member of the House Committee on Oversight and Government Reform: “Lost in the debate over how to best legislate the aftermath of the financial crisis has been the necessity to conduct an inward examination at the too-cozy relationship between government enterprises and private industry. The indisputable and disturbing reality is that as Fannie-Freddie executives were accepting Countrywide VIP loans, they were also developing a strategy to form a partnership with Countrywide with the goal of using that relationship to influence the mortgage industry and policymakers. For all the impact that the subprime meltdown had on laying the groundwork for a full-scale financial meltdown, the true nature of this strategic partnership should be exposed so we can measure the extent to which this too-cozy relationship had in fostering the conditions that led to the financial meltdown. We always knew that Countrywide’s VIP program was established to curry influence with policymakers, now we see that it was actually a two-way street with Fannie-Freddie trying to build favor with Countrywide – the outstanding question is who gave what to whom and why?”
Indeed. The Senator from Countrywide, Chris Dodd, will leave office with barely a slap on the wrist from his colleagues — but the boot mark of disgusted taxpayers on his back side is indelible.
It’s time for ballot-box accountability for the rest of the subprime slime gang.
Flashback: The Fannie and Freddie debacle – An autopsy