Over the past week more Countrywide wrongdoing has come to light.  Specifically, its preferential loans for public officials and business partners.  What began last Saturday with this article from the WSJ last Saturday has grown throughout the week to culminate with this Portfolio article expose listing more "Friends of Angelo" or "FoAs".  Since no one has come forward to refute the preferential treatment given by Countrywide to these individuals who are supposedly granted with the "public's trust", The Prince has a difficult time not believing the graft that has been uncovered.
All the articles try to discount the story by saying that the preferential loan treatment is not illegal so long as Countrywide did not receive preferential treatment.  Then all the articles go to great lengths to say that it has not come to light yet whether or not Countrywide received such special treatment.  The Prince is not surprised that such shady deals occurred since such deals are just a reflection of the fraudulent behavior that percolated down from the upper reaches of mortgage finance at the rating agencies down to the broker on the corner.  What really troubles The Prince is that there really is no way for us, i.e. the public/taxpayers, to determine if Countrywide did get anything in exchange for its largess toward public officials.
Corruption among public officials does not surprise The Prince.  However, before, he could comfortably claim that the ineptitude of our elected representatives and government agencies to control the mortgage market that spiraled out of control (in a whirlwind of conflicts of interests, greed, fraud, manipulation, weakening lending standards, and cheap money) could be attributed to ignorance or lack of resources/creativity to actually police the mortgage industry/market.  If you need evidence of how widespread the problems were in the industry just read the new stories about Countrywide, Fannie Mac, and Bear Stearns since last spring.  Better yet, take a look at Mortgage News Clips for its carefully selected stories and commentary or read Richard Bitner's book on the problems in the industry from the Countrywide's and WAMU's down to the mortgage broker on main street.
Let's think about this.  How would we be able to show that Countrywide got preferential legislative treatment or better pricing from Fannie Mae when it sold the quasi-government backed company loans for its portfolio?  The regulatory environment in the mortgage industry was lax or non-existent and ripe for fraudulent and systemically destructive behavior for years before Countrywide started handing out bribes in the form of cheaper mortgage to public figures who could influence such a regulatory environment.  Countrywide was the largest mortgage originator/lender in the country.  So how will we know it got better pricing than it deserved from Fannie Mae?  Fannie Mae can always claim that Countrywide got better prices for its loans because of its size in the industry.
Even if Countrywide did not get better prices for the loans it sold to Fannie Mae, the GSE still probably turned a blind eye to loans that it knew where rife with fraud red flags and made in an extremely weak underwriting standard environment.  Shouldn't the fact that Fannie Mae bought loans from Countrywide at all in 2006 and 2007 amount to preferential treatment?  If nothing else it shows a severe lack of judgement just like Johnson's decision to not disclose his personal financial arrangement with Countrywide showed terrible judgment.  Even if he had disclosed such a sweetheart deal having such a sweetheart mortgage deal from Countrywide presents a conflict of interest that if maintained is just bad business.
As far as the public officials that have been caught up in Angelo Mozilo's shady graft game of waving points, giving lower rates, and writing loans that may not have made good business sense The Prince is not surprised.  The hypocrisy in Washington has always been thick enough to cut with a knife so why should we expect different when it comes to the largest financial failure in our nation's recent past?   Connecticut Senator Christopher Dodd, North Dakota Senator Kent Conrad, former Secretary of Housing and Urban Development Alphonso Jackson, former Secretary of Health and Human Services Donna Shalala, and former U.N. ambassador and assistant Secretary of State Richard Holbrooke were part of Countrywide Financial's "V.I.P." program in 2003 and 2004.  The program waived points, lender fees and company borrowing rules. The FoAs were given more desirable deals than those available to non-influential borrowers. Perhaps no piece of Portfolio's article hits harder than the section regarding the refinancing of an 8-unit apartment building in Bismarck, North Dakota, which violated Countrywide's policy of not giving loans for larger buildings.  According to Portfolio, Mozilo apparently told a staffer to "make an exception due to the fact that the borrower is a senator."  If there is a God then Mozilo will go to jail for securities fraud or at least insider trading for the $474 of supposedly "scheduled" Countrywide share sales.  Or I guess we could just all hope that the voters put the screws to the public officials benefiting from his largesse.  The Prince is not holding his breath.
Then again why is The Prince or anyone else getting worked up about this?  Just one more sad story to add to the pile that have come out of the mortgage crisis.
The Prince is aware that his posting has been slow but he has been moving over the last week and will resume more regular posting once things get settled down.  It has actually really broken the Prince's heart to not be blogging with all the interesting action occurring in the financial world, like the struggles of Lehman Brothers or the sweeping statements by different Fed officials on finance regulation.