House Oversight and Government Reform chairman Darrell Issa (R-CA) has issued his first subpoena, and the lucky recipient is Countrywide Financial. Issa wants to see a wide range of documents pertaining to the “Friends of Angelo” mortgage program.
What was “Friends of Angelo” all about? Well, “Angelo” is Angelo Mozilo, the CEO of now-defunct Countrywide Financial Corporation. His “friends” were politicians he needed favors from, including Senators Chris Dodd (D-CT) and Kent Conrad (D-ND), along with a rogue’s gallery of Fannie Mae executives. He arranged “sweetheart” mortgage deals for them, unavailable to any member of the public, which saved his “friends” big money in interest payments.
What did Angelo get from his friends, in exchange for these wonderful loans? As the Wall Street Journal explained in an editorial, “nearly a third of Countrywide’s mortgage portfolio is composed of an especially chancy loan called a payment-option ARM.” This type of loan allowed “borrowers to pay less than the interest owed each month, with the shortfall added to the principal balance.”
Since borrowers obviously couldn’t keep shunting portions of their interest onto the principal forever, the load would eventually be “recast”, which means the borrow is suddenly on the hook for all that deferred interest… and new interest would be calculated on top of that. In other words, people who were having trouble paying the interest on their mortgage for months or years were suddenly on the hook for higher payments. As you might imagine, many of them defaulted, and what Angelo wanted his good friends in the government to do was take the worst of these loans off his hands, and absorb them into the Federal Housing Administration. That would be you, dear taxpayer.
The Wall Street Journal editorial explaining this situation was published in June of 2008. You remember what happened next, don’t you?
Countrywide was a toxic waste dump for some of the worst mortgage paper of the subprime financial crisis. Angelo Mozilo was eventually prosecuted for fraud, and settled by paying a $22 million fine and returning $45 million of the money he raked in through illegal stock trades, made in the knowledge his company was on the verge of collapse. As it turns out, Mozilo didn’t actually pay back the $45 million. The loss was handled for him by Countrywide’s new owners, Bank of America… which received a $20 billion dollar bailout from the government.
Ever since the financial crisis, liberals have been bleating that it was somehow a failure of capitalism, caused by bad behavior on the part of bankers. They’re right about the bad behavior, but it had nothing to do with capitalism. It was all about purchasing influence with powerful Democrats, who crashed our financial system to help out fat-cat contributors like Angelo Mozilo.
No wonder the Democrats are now frantic to destroy Darrell Issa. When he announced his first subpoena request, he declared that Americans “have a right to know the totality of who participated in the Countrywide VIP program, and what they did in return for access to it.” Once the people have the full story, they will understand how comprehensively the Democrat Party and its presidential candidate deceived them in the fall of 2008.
California liberals have formed a nonprofit group called “The Third Lantern” dedicated to ruining Issa, spending millions to manufacture a smear campaign. I wonder how much of their funding comes from certain millionaires and their good friends.
Sign up to the Human Events newsletter