Nobody ever heard of Countrywide Financial until the subprime mortgage bubble was bursting. And then everybody knew about it. This was the company that thanks to lackadaisical government regulation and greed got “out there” on nine million home loans worth about $1.5 trillion, a portfolio that was taken over by Bank of America.
There was a lot more to the story, such as Countrywide’s reliance on Fannie Mae, the mortgage behemoth that later was taken over by the government but before that had bought a lot of Countrywide’s subprime business. It was all part of a horrendous collapse that, with foreclosures, a credit crisis and a general economic downturn, brought the United States to the brink of depression.
How exactly Countrywide was able to get in so deep so fast without any flags going up may be a complicated story, but one aspect of it becomes more clear in a recent report from the U.S. House of Representatives. Countrywide was in a position to affect legislation that might have resulted in more scrutiny and more regulation and might have actually reformed what turned out to be an ineffective system of overseeing the financial industry.
But it turns out that some key current and former members of Congress had VIP rank with Countrywide that landed them loan discounts. And the list includes Republicans and Democrats. Among them, no less than former Sen. Christopher Dodd of Connecticut, Banking Committee chairman, and fellow Democrat Kent Conrad of North Dakota, a senator who chairs the Budget Committee. Former Housing and Urban Development Secretaries Alphonso Jackson and Henry Cisneros and former Health and Human Services Secretary Donna Shalala got discounts as well.
Let’s hope these individuals are thoroughly embarrassed and perhaps even “born again” with regard to the need for even tougher regulation of the financial industry than was reluctantly enacted after the collapse.