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The Charmed Life of a Subprime King

The former Countrywide Financial chief is back in the news. You remember, the subprime king with the perma-tan?

When I saw his name in the headlines again I hoped to finally find news of a criminal indictment. Steal a Snickers bar from the 7-11 and you could face jail time. Angelo Mozilo took half a billion dollars in compensation for loans that blew up our economy. And so far, he’s gotten off virtually scott free.

The Securities and Exchange Commission did bring a civil suit, accusing Mozilo of engaging in fraud and insider trading to conceal signs of the coming housing crash. He flicked that away with a cash settlement that made nary a dent in his personal fortune.

The new dirt on Mozilo looked promising. According to a Congressional investigative report, he created a “Friends of Angelo” unit, which doled out discount loans to members of Congress who had the power to rein in his risky business.

The report is the outcome of a four-year investigation prompted by Wall Street Journal and Portfolio magazine stories in 2008 that exposed Countrywide VIP loans to several Democratic members of Congress. Republican Congressman Darrell Issa, Chair of the House Oversight and Government Reform Committee, jumped on the case. He subpoenaed Bank of America, which had taken over the failed subprime lender, for all loan documents related to members of Congress and other officials.

What did he find? The report alleges that Angelo Mozilo intervened personally to set special discount terms on loans for several members and staff of the key committees with jurisdiction over the mortgage industry — the Senate Committee on Banking and the House Committee on Financial Services.

Among those who allegedly took advantage of the discounts are former Senator Chris Dodd (D-Conn.), Senator Kent Conrad (D-N.D.), Rep. Howard P. “Buck” McKeon (R-Calif.), Rep. Elton Gallegly (R-Calif.) and Rep. Edolphus Towns (D-N.Y.).

So what did these VIPs get? The perks typically included a half-point discount on interest rates and a waiver of junk fees. While the report doesn’t attempt to estimate the value of the discounts, simple math indicates they could easily have run into the tens of thousands of dollars. This would certainly be more than the value of a round of golf, an example the House Ethics gift rules cite as a big no-no.

The report also alleges that Mozilo guaranteed loan terms and approvals for VIP clients before they even filled out applications. With regard to Rep. Towns, they claim that Countrywide “ignored Towns’ low credit score in order to process his loan quickly.” When Senator Conrad, the current Chair of the Senate Committee on Banking, applied for a $1.16 million loan in 2002, documents show that Mozilo instructed an employee to “take off 1 point, no extra fees and approve the loan — if any problem, advise Angelo asap.”

So is this the smoking gun? The report states that under U.S. law, “whoever directly or indirectly, corruptly gives, offers or promises anything of value to any public official … with intent to influence an official act” shall be fined, imprisoned or both.

That sounds pretty strong. But then it goes on to say,

“Angelo Mozilo and Countrywide’s lobbyists may have skirted the federal bribery statute by keeping conversations about discounts and other forms of preferential treatment internal. Rather than making quid pro quo arrangements with lawmakers and staff, Countrywide used the VIP loan program to cast a wide net of influence.”

So once again, Mozilo may very well brush off the latest bit of annoying publicity and walk away unscathed.

Sarah Anderson directs the Global Economy Project of the Institute for Policy Studies.

This column is distributed by OtherWords.

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Sarah Anderson directs the Global Economy Project at the Institute for Policy Studies.

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