Editorial: Investigate Loan Deals

Sen. Dodd should answer all questions surrounding his Countrywide loans.

17 Jun 2008 // ‘Dodd denies,” began the headline appearing on the front page of Saturday's edition of The Day. No politician ever wants to see those words in the headline of a story that he is the subject of.

What Connecticut Sen. Christopher J. Dodd denies is that he sought or expected preferential treatment from Countrywide Financial when securing two home mortgages in 2003 for a townhouse in Washington and a home in East Haddam.

Conde Nast Portfolio magazine, citing internal documents and a former Countrywide employee, has reported that Sen. Dodd, a Democrat, was on a list of VIPs who received discounts on refinancing deals and mortgages. According to the report it was known within Countrywide as the “FOA (Friends of Angelo) list,” referring to company CEO Angelo Mozilo.

At the time Sen. Dodd obtained the loans he was a member of the Senate Banking Committee. He is now the chairman. Sen. Dodd has been highly critical of financial institutions that played fast and loose with lending rules, approving subprime loans that many borrowers could not afford. The senator has pushed for a federal relief program to save many of those homeowners from foreclosure. We have endorsed his proposal.

Countrywide Financial was among the most reckless of lenders. Interesting, then, that Sen. Dodd turned to Countrywide for obtaining his mortgages, troubling if he did so because it provided him with a sweetheart deal.

Sen. Dodd last week, in what appeared to be a carefully worded statement, said he and his wife “shopped around and received competitive rates.” The senator said he “did not seek or expect any favorable treatment.”

But though he did not “seek or expect any favorable treatment,” did the senator know at the time that he had received it? Did the mortgage deals raise a red flag for the senator? Should they have?

Sen. Dodd and his wife, Jackie Clegg, took out a $506,000 loan to refinance their Washington townhouse at 4.25 percent interest. The $275,000 loan to refinance their East Haddam home came with a 4.5 percent rate. Portfolio, citing company documents, reported that Countrywide had agreed to shave three-eighths of a point off the first loan, one-quarter point off the second.

The lower rates could save the Dodds $75,000 over the 30-year life of the loans, Portfolio reported, but the article did not clarify how it arrived at that figure.

Countrywide has contributed a total of $21,000 to Sen. Dodd's campaigns since 1997.

Also caught up in the scandal was Sen. Kent Conrad, a North Dakota Democrat and chairman of the Budget Committee. He chose to more aggressively address the issue. We urge Sen. Dodd to do likewise.

”Although I did not ask for or know that I was receiving a discount, and even though I was offered a competitive loan from another lender, I do not want to have received preferential treatment,” Sen. Conrad said.

He is donating $10,500 to Habitat for Humanity - a charitable group dedicated to help people on modest incomes obtain homes. The donation equals the money Sen. Conrad expects to save on a Countrywide discounted loan. He is refinancing a second loan he received.

Last week James A. Johnson, former head of Fannie Mae, the government mortgage agency, resigned from Democratic Sen. Barack Obama's vice-presidential search committee because he had accepted discounted loans from Countrywide. There are indications that other top politicians and cabinet members also received favorable loan terms.

Rather than issuing statements, Sen. Dodd needs to answer any and all questions about the circumstances of his attaining the Countrywide loans. We join the Citizens for Responsibility and Ethics in Washington in calling for the Senate and House ethics committees to investigate whether the acceptance of bargain rate loans violated the prohibition against accepting gifts.

The committees need to determine if any other congressmen received favorable loans in possible violation of the ethics rules. The House and Senate should exam whether rules against gift taking require tightening when it comes to accepting loans.

The public needs confidence that those proposing ways to solve the subprime mortgage crisis did not take advantage of their positions to get deals from the very folks largely responsible for causing the crisis