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General News    H1'ed 7/21/10

How Reporters Provide Cover For Darrell Issa's Lies On The Countrywide "Scandal"

Message David Fiderer

A year ago,Associated Press reporter Larry Margasak got caught in a lie. He manufactured a false lede by concealing critical information:

Despite their denials, influential Democratic Sens. Kent Conrad and Chris Dodd were told from the start they were getting VIP mortgage discounts from one of the nation's largest lenders, the official who handled their loans has told Congress in secret testimony.

The witness also recanted his statement. When asked a second time if he told Dodd that he was getting special treatment, he said, "I don't remember..., was conveyed in some way, shape or form." No honest journalist would report that Dodd was "told from the start," about a mortgage discount.

In fact, the Senate Ethics Committee concluded, after a year-long investigation into the matter, that the 28,000 customers in Countrywide's VIP program offered terms that, "were not the best deals available at Countrywide or in the marketplace at large." Customers," were required to meet the same underwriting standards," as everyone else. Overall, it appeared that Countrywide's VIP customers were treated VIPs were "often offered quicker, or more efficient loan processing." In other words, Countrywide's customers had no reason to believe that its VIP program much different from the VIP customer programs at Verizon, Expedia, Acura and Pizza Hut. The Senate Ethics Committee cleared both Dodd and Conrad of all ethics charges, and anyone who reviewed the terms extended to Dodd could figure out right away that no material "discount," was ever extended. Later, documentary evidence would emerge to show that the Countrywide "whistleblower" had been telling lies from the start.

Margasak pulled a similar stunt yesterday, when he reported that Countrywide extended "discounted mortgages," to employees government sponsored enterprises, while failing to mention that the Senate Ethics Committee found no evidence that the deals were better than those offered to anyone else. He also put forth this whopper:

The documents reveal that when Countrywide was depending on government-sponsored firms to finance billions of dollars worth of subprime loans that touched off the housing meltdown, it was giving employees at the largest of those companies -Fannie Mae-sweetheart deals on their own home loans.

That claim is more than a little deceptive on a variety of levels. The GSEs didn't buy or insure subprime mortgages. They only purchased subprime mortgage securities sold by investment banks. (That was how the GSEs did an end-run around their own underwriting standards.) There's no evidence that Countrywide needed the GSEs to make its subprime bonds marketable. Countrywide's primary connection with the GSEs, which long predated its involvement in the subprime segment, was selling prime mortgages. Countrywide was the biggest mortgage lender, period. Margasak relies on a six-degrees-of-separation conflation, wherein some Fannie Mae employee, who may or may not have had anything to do with the firm's portfolio criteria, gets a loan from the nation's largest mortgage lender at market rates, and suddenly there's a conspiracy theory to explain the subprime meltdown.

Like other bogus right wing scandals--corruption at ACORN, Climategate, Black Panther voter suppression--the media narrative about the "sweetheart deals" given to Countrywide VIP customers appears to be impervious to fact checking. The story keeps emerging in new mutant forms, in precisely the same manner that new "evidence" against global warming keeps emerging on Fox News, where professional liars--Andrew Breitbart, James Inhofe, Karl Rove--are given an unfettered platform. Darrell Issa and his staffers pull the same kinds of stunts that Breitbart does. He carefully selects his facts to fabricate scandals out of thin air. Six weeks ago he was pumping,"The Sestak Affair - Obama's Watergate?" His new Countrywide VIP "scandal" is equally spurious, as reported by Margazak:

"In 1999, Countrywide reached an exclusive agreement to sell Fannie Mae billions of dollars in mortgages at a discounted rate," Issa said in the letter.

Records compiled by a trade publication, Inside Mortgage Finance, show Fannie rapidly expanding its purchases of Countrywide mortgages and a decline in sales of them to Freddie.

In 1998, Countrywide sold $25.6 billion in loans to Fannie and $17.7 billion to Freddie. By 1999, the figures were $30.8 billion to $11.2 billion in Fannie's favor. By 2004, the spread was much wider: $67.7 billion in Countrywide mortgages sold to Fannie Mae compared with $2.9 billion in mortgages sold to Freddie Mac.

Mortgage lenders sell mortgages to the GSEs for the same reason that Proctor & Gamble sells Tide to Walmart. That's their business model. Every sale of of a pool of mortgages is "exclusive" because you can't sell the same mortgage to two different people. And if, as Issa claims, Countrywide sold mortgages to Fannie at a "discounted rate," then Fannie got a windfall. Of course, Issa's amorphous reference to a "discounted rate," in the context of nothing, is meaningless. By the way, Countrywide was not a player in the subprime market in 1999.

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For over 20 years, David has been a banker covering the energy industry for several global banks in New York. Currently, he is working on several journalism projects dealing with corporate and political corruption that, so far, have escaped serious (more...)
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