The Farce Is Complete: In The Case Of Countrywide, Congress Finds Itself Innocent Of Being "Friends Of Angelo"

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Just when you thought the seemingly endless rabbit hole of Wall Street-Washington corruption, cronyism, co-option, crime and kickbacks may have finally come to an end, here comes the House Ethic Committee to pronounce that no ethics breaches were found among House members in its investigation involving the scandal surrounding Countrywide "VIP loans" and the "Friends of Angelo." And in just doing so, the House effectively cleared itself of any wrongdoing and that's it, case closed - move along... Move along.

For those who may have forgotten, it was only back in July that yet another House Committee, that for Oversight and Government Reform, found "Countrywide used its VIP Program to aid its lobbying efforts as well as to strengthen its relationship with taxpayer backed Fannie Mae.  Countrywide partnered with Fannie Mae in a strategic business alliance that also included joint lobbying efforts." Specifically, the report alleged that:

“The Committee’s investigation found Countrywide lobbyists and CEO Angelo Mozilo used discounted loans as a tool to ingratiate itself with policymakers in an effort to benefit the company’s business interests,” said Issa.  “A former lobbyist for Countrywide testified that Members of Congress, staff, and other government officials were directed to the company’s VIP program as part of an effort to create a favorable impression of the company on Capitol Hill.  This preferential treatment – that varied depending on the influence of the borrower – was not routinely offered to the public.”

Further, as part of its work, this other Committee found that:

  • A log of all loans processed by Countrywide’s VIP unit showed 17,979 loans between January 1996 and June 2008. Borrowers included Members and employees of Congress, the White House, Fannie Mae, Freddie Mac, federal agencies, and other government entities. The log listed hundreds of duplicate loans – the actual number of VIP borrowers was considerably less than 17,979. Lawyers for Bank of America acknowledged that the log may not contain the full roster of VIP borrowers.
  • Countrywide established the VIP unit in 1991 to process loans for senior Countrywide officials and their friends. Referred to internally as Branch 850, the unit had 13 full-time employees trained to provide enhanced customer service. According to VIP Loan Unit operating procedures, the suite of benefits available to VIP borrowers included program/underwriting and pricing exceptions.
  • [Former Countrywide lobbyist] Jimmie Williams referred Members of Congress and congressional staff to the company’s VIP desk in California to create a favorable impression of the company on Capitol Hill. To better position himself to lobby Members and staff, Williams made sure they received enhanced customer service.
  • In approximately 2000, Jimmie Williams began routing Members of Congress and congressional staff who he lobbied to a referral desk in California. Williams understood that the referral desk could handle loans for high-profile clients because the staff there frequently handled loans for celebrities. The referral desk was in fact the VIP unit.

Well, as it turns out, all these findings are now moot because, as the AP, reports, the first Committee, that which allegedly represent Ethics at the House (trying typing that with a straight face), has no power to actually do anything for one simple reason: all the allegations of favored treatment involved loans that were granted so long ago that they fell outside the panel's jurisdiction. I.e., the statute of limitation has expired.

How very convenient - as it turns out Congress was abusing taxpayer money and receiving preferential treatment for years, but sorry, nothing can be done about it. It just happened so very long ago...

There is more:

The committee added, however, that participation in the VIP program did not necessarily mean borrowers received the best loan deal available — and most lawmakers were not even aware they were placed in a VIP unit.

 

The actions of unnamed House staff members were harshly criticized. Emails indicated they reached out to Countrywide lobbyists for assistance with their personal loans, but those actions also were too old to remain in the committee's jurisdiction. The panel said that if the incidents had been more recent, the staff members could have faced discipline.

Not discipline. Anything but discipline...

The Oversight report named six current and former members of Congress who received what Countrywide referred to as discounts. All of their names had surfaced previously.

 

The committee has no jurisdiction over actions that occurred more than six years prior to the current Congress — which began in January 2011.

 

But even if the statute of limitations had not run out, the committee said, inclusion in the VIP program was not by itself a violation of House rules or laws. The panel said it found that Countrywide's "discounts" applied to standard loan rates that were commercially available elsewhere.

 

"They are not the kind of 'gift' which would be, in and of itself, outside the realm of reasonable market rates for commercially available loans," said the statement issued by Ethics Committee Chairman Jo Bonner, R-Ala., and ranking Democrat Linda Sanchez of California.

 

Even so, the committee said, members must take steps to ensure they are being treated no differently than a member of the public who is similarly situated.

It gets better:

The committee statement added, "Of greatest concern...was email evidence regarding the specific conduct of some employees...who may have reached out to lobbyists or other government affairs officials at Countrywide for assistance with their personal loans."

In other words the biggest concern was the fact that someone was caught with evidence exposing them red-handed, not that there was gross abrogation of congressional responsibilities, abuse of professional position, and receiving kickbacks in exchange for who knows what actions lobbied on behalf of the one firm that has now cost Bank of America tens of billions in contingent liabilities which have become all too real liabilities, and is in the running for the worst M&A deal of all time.

One really could not make this up if one tried...

So just like that, case closed, and once again in the case of people versus crony capitalism, the people lose.

* * *

And just to give readers a glimpse of the gross cover up that happened behind closed doors, but luckily caught on the record, and which allowed the House to continue on its merry criminal way, but where once more nobody will be held responsible or accountable, here are some extracts from the June 2011 deposition of none other than Agent Orange himself: Angelo Mozilo, courtesy of Manal Mehta.

* * *

Q. Was there a program called "The Friends of Angelo Program" at Countrywide?
MR. SIEGEL: Question's irrelevant.
THE WITNESS: No.
BY MR. SELENDY:
Q. Did you ever hear the term "FOA loan"?
A. Yes.
Q. What does that refer to?
A. Friends of Angelo, but it was not a program.
Q. Okay. What was it, sir?
A. My understanding of it was when a file was put on my desk one day that had "FOA" on it, I asked, "What does this mean?" And they said, "Friends of Angelo." And I said, "Why are you doing that?" Because I originate a lot of loans. Almost everybody I come in contact with, that was my job, was to originate loans. That's who I was. That's why I started the company. With taxi drivers -- Do you have any interest in this answer or --
Q. I do have an interest.
A. Then I'll just wait until you're finished.
Q. Continue, sir. Every statement you make is on the record. It's recorded both in the --
A. I know it is.
Q. -- in the transcript and the video. You can continue, sir.
A. I made it known to anyone who had an interest that I was in the mortgage business -- waiters, taxi drivers, limo drivers, stewardesses, gardeners -- and I'd give them my card, and when they called, I put those loans into our underwriting system. My people decided to label "FOA." They were not friends. But it was business. That was my business, to originate loans. And I asked the people, "Why did you put FOA? Why are you doing this?" And they said, "Because you referred them to our underwriting system. If we reject the loan, we want to warn you in advance so you're not blind-sided." And that was the purpose of it. That was fine by me. And that's the way it continued.
Q. First document is dated December 17th, 2004. In the subject line it states "Re: FOA." And you state in your e-mail: "In case you didn't receive my first message, you are to approve and close this loan. Next time you have a request of this nature from a former senior executive of Countrywide you should contact me directly." Do you see that, sir?
A. Uh-huh.
Q. And this is an example of a Friend of Angelo Loan; correct?
MS. CONCANNON: Objection.
MR. SIEGEL: Argumentative.
BY MR. SELENDY:
Q. Correct?
A. This is an example that you placed in this category of Friend of Angelo. As I said, I was a -- I was the originator of tens of thousands of loans since 1968.
Q. Well, you say I placed it in the category, but that's actually in the subject line of the internal Countrywide e-mail; correct?
A. Yeah, but this whole package is this -- you created this. What your question is -- so yeah, I made that statement seven years ago.
Q. Right. And --
A. Seven and a half years ago to be exact.
Q. If you'll notice, the e-mail that's sent to you states, starting in the second line: "The loan exceeds guidelines based on the following: LTV exceeds guidelines by 9.9 percent, cash out exceeded by $200,000, FICO 627 should be 616." Do you see that?
A. Where are you reading this from?
Q. This is in the middle of the page in the e-mail that's sent to you on the FOA loan.
A. Yeah.
Q. Do you see that?
A. Uh-huh.
Q. And the Structured Loan Desk stated that they were unable to grant an exception for that loan; right, as reflected in the top paragraph?
MR. SIEGEL: Document speaks for itself.
MS. CONCANNON: Objection.
MR. SIEGEL: It's irrelevant.
Q. Do you see that?
A. If that's what it says. I mean, I'm trying to digest this entire document. But if that's what it says, it says that.
Q. Right. And so did you have any basis, from an underwriting perspective, in determining that this was, in fact, a good loan for Countrywide to originate, or was it simply that this was somebody that you knew?
MR. SIEGEL: Question's argumentative.
MS. CONCANNON: Assumes facts not in evidence, lacks foundation.
MR. SIEGEL: Irrelevant.
MS. CONCANNON: Calls for speculation.
THE WITNESS: Is this a loan that MBIA insured?
MR. SELENDY: I'm not here to answer your questions, sir.
THE WITNESS: Well --
MR. SELENDY: I'd like an answer to mine.
THE WITNESS: Look, there could be --
MR. SIEGEL: Why don't you -- why don't you read the whole document. You'll see the answer. Argumentative, irrelevant and --
THE WITNESS: The problem is I'm having a problem reading this stuff.
MR. SIEGEL: The question is: Did you have any basis from an underwriting --
THE WITNESS: This is a 59 percent LTV? Is that what this says here?
MR. SELENDY: That's what the document states.
THE WITNESS: Okay. That's the reason, because 40 percent down.
BY MR. SELENDY:
Q. So you decided that although that attribute had already been considered by guidelines and by the Structured Loan Desk, for you, because this was somebody you knew, that was sufficient?
MR. SIEGEL: That misstates the document. It's argumentative and it misstates facts not in evidence.
THE WITNESS: I'll go back to my original statement. I would make this loan to anybody, whether they were a friend or not.
Q. So did you make any effort to instruct the Structured Loan Desk to change their processing so they would give this kind of loan to  anybody, even though they had told you they would not grant it under their existing protocol?
MS. CONCANNON: Objection.
THE WITNESS: No.
BY MR. SELENDY:
Q. Okay. Why is that?
A. Because it didn't require that. And secondly, I didn't -- that was not my role, to go in and change guidelines. My role was to deal with situations like this. I'm an underwriter. Somebody puts 40 percent down, I'm comfortable.
Q. But you didn't want to be comfortable for everybody, huh, just people who --
MR. SIEGEL: Oh, boy, that's argumentative, asked and answered.
THE WITNESS: As I said, my role is not to change guidelines.
BY MR. SELENDY:
Q. Can you turn ahead to the document that has a Bates number ending in 5921? It's dated April 6th, 2006.
A. This one to ?
Q. Yes. You say in that, in that request, you say: "Close the loan right away, and thank for this business. He is a close, personal friend." Do you see that?
MR. SIEGEL: Hang on a second, Angelo, while I try to find this document.
THE WITNESS: Towards the end.
MR. SIEGEL: Oh, it's towards the end. Okay. Got it.
MR. SELENDY: Okay.
Q. Again, my question is: Do you see that you  stated: "Close the loan right away, and thank for this business. He is a close, personal friend"? Do you see that?
A. Yes.
Q. And was that true?
MR. SIEGEL: Question's irrelevant.
THE WITNESS: A close friend, yeah.
BY MR. SELENDY:
Q. Okay. And in the e-mail that came to you, do you notice that it states, in the list of attributes, "Verified income is $5,848 versus $20,833 stated"? Do you see that?
MR. SIEGEL: Document speaks for itself.
THE WITNESS: I don't see that.
BY MR. SELENDY:
Q. It's the sixth line up, seventh line up from the bottom.
A. Uh-huh.
Q. Do you see that?
A. Yes.
Q. What does that mean, "Verified income is 5,848 versus 20,833 stated"?
A. I don't know.
Q. Doesn't it mean that he said on his application he earns 20,833 per month, whereas all Countrywide could verify was 5,848?
A. I'm not sure.
Q. You don't know.
Did you know at the time?
A. Did I know in 2006? I don't know what I knew in 2006.
Q. Would you have wanted to know that in order to be able to decide whether the loan should be closed right away?
MS. CONCANNON: Objection. Vague, overbroad.
MR. SIEGEL: Irrelevant.
THE WITNESS: Again, there are many factors in underwriting a loan. This, again, is a loan that came to me. I'd approve it for everybody. This is a loan that had a -- he had reserves of a million one hundred fifty-five thousand -- one hundred fifty-six thousand dollars. It was a -- trying to look at the total CLTV here. The LTV was 40 percent loan to value, had 60 percent against the first, and he had a -- and he had a 39 percent second, so total was 79 percent. That's over 20 percent down with a 1,155,000 reserve. And more important to me is the loan performed and performed well.
BY MR. SELENDY:
Q. Does it matter to you that the stated income appeared to be false based on Countrywide's verification?
MS. CONCANNON: Objection.
MR. SIEGEL: That's argumentative, calls for speculation, misstates the document.
THE WITNESS: I think the real issue is what his real income is, and I'm not making a judgment.

* * *

Q. What is an exception loan, sir?
A. It's a loan that we have -- we have specific guidelines that are easily translated into algorithms, but there are many factors in the human experience that cannot be -- you cannot put an algorithm to it; requires someone to look at it and review it. If it was as simple as putting these algorithms in and putting them in a computer, I would not have 66,000 employees, I would have 5,000 employees. But our responsibility, our moral responsibility, our legal responsibility was to make out, all of the advocates for housing, particularly in minority communities, their mandate to banks, CRA, Community Reinvestment Act, back a long time ago. Same thing. There are exceptions. Nobody can fit in the same -- everybody can't fit in that same mould. But everybody has an opportunity, should have an opportunity to own a home where they can demonstrate the ability to pay. And to do that properly and effectively and honestly and truthfully is to do it right, referring the loan out and have somebody take a look at it to see what was missed in the system.
Q. Mr. Mozilo, I agree with much of what you said, but I still need an answer to my question, which is: Is an exception loan a loan that is an
exception to guidelines?
A. Could be.
Q. Isn't that the definition of an exception loan?
MS. CONCANNON: Objection.
MR. SIEGEL: Asked and answered. Just gave you a definition.
THE WITNESS: Well, I don't know, you know. I can't answer your question. I don't know, can't define exactly the global meaning or the universal meaning of an exception. It was simply an exception from the guidelines. There could be other reasons for it.

* * *

You had personal involvement in ensuring that loans were given to public officials on favorable terms; isn't that right?
MR. SIEGEL: Question's argumentative.
MS. CONCANNON: Objection.
MR. SIEGEL: Vague and irrelevant. I don't think you insured any of those.
THE WITNESS: Not only that, but I think that there is no loan that I made to anyone where, one, they couldn't get that loan or a better loan someplace else with thousands of competitors out there. And secondly, one that I didn't believe was a good loan for Countrywide.
Q. Can I have an answer to the question?
A. That's the answer to your question.
Q. My question was whether you had personal involvement in ensuring that loans were given to certain public officials on favorable terms?
MR. SIEGEL: The question's vague, argumentative.
BY MR. SELENDY:
Q. Is the answer "yes"?
MR. SIEGEL: The question's vague, argumentative, misstates the testimony, and it's irrelevant.
THE WITNESS: I recall making some loans to -- actually, I didn't make any loans to anybody. I referred loans over to the underwriters who  underwrote those loans, and from time to time I'd be called for whether or not the exception was acceptable or not acceptable. Sometimes they were acceptable, sometimes they weren't.

* * *

Q. Your simple message was to do everything possible to gain productivity and market share; correct?
MR. SIEGEL: Misstates the document.
THE WITNESS: Let me -- let me -- I'm going to read this to you: "As competitors merge we're able to attract new talent into the company, as well as a new and broader base of customers. My message relative to this period of significant change is simple: Be aggressive during the period of competitive advantage to gain market share." That is to get these people, to get this talent. Because Countrywide was nothing more than very talented people. Our advantage over our competition was not product or price, was quality of people. That's my message here.

* * *

Was your 2007 compensation in excess of $140 million?
MR. SIEGEL: Question's vague.
THE WITNESS: Sounds like a lot to me. I don't think so, but I don't know.
BY MR. SELENDY:
Q. Was it over a hundred million dollars?
A. I don't know.
Q. Was it over $50 million?
A. Let's take the compensation apart for a second. I was paid around $2 million a year, I believe, 2 or 2 1/2 million a year base salary.
Everything else I received was based upon earnings and stock price, period. So anything above the $2 1/2 million or $2 million, whatever that number was.
Q. Most -- most people would know, don't you think, whether they made more than a hundred million dollars in a particular year?
MR. SIEGEL: The question is argumentative. You don't have to answer that. That's harassing.
THE WITNESS: My focus was on the company, not on my compensation. I wanted to make sure the company came first. And so I don't know what I  made.

* * *

 

And last but not least:

Q. Did you try to achieve political objectives in approving loans outside of guidelines?
MR. SIEGEL: Question's irrelevant, argumentative and asked and answered.
THE WITNESS: And insulting. And insulting.
BY MR. SELENDY:
Q. Can I have an answer?
A. It's insulting, number one.
Number two, it's the least political company you'll ever find, was Countrywide. There was never an act, an action, an event, anything, that politicians did in favor of Countrywide, ever.
Q. I don't think I have an answer to my question. Did you try to achieve political objectives by approving loans outside of guidelines?
A. No.

(The full Mozillo transcript can be found here)

And that, ladies and gentlemen, is what is called commiting perjury, but since one guilty verdict would take down half of the House of Representatives as complicit criminals, he gets to walk.

The New Normal justice.

* * *

That's ok though, back than it was common knowledge that house prices can never drop. Just like it is common knowledge now that the central banks can never fail, and that interest rates can never, ever surge again.