You just can’t make this stuff up: today the U.S. House of Representatives released a report titled How Countrywide Used its VIP Loan Program To Influence Washington Policymakers.
In it, they present evidence on how Countrywide—which BofA bought for $2.5b in 2008 in a deal that was just called the worst in the history of American finance—gave politicians and Fannie executives special loan programs in exchange for preferential treatment.
Below is the full report plus a notable quote from former Countrywide head Angelo Mozilo that Bloomberg highlighted today.
The quote from Mozilo is reckless and wrong in the context of influence peddling on Capitol Hill. But I’ll offer this one offsetting point that’ll drown in a sea of ‘evil banker’ rhetoric today: the concept implied by Mozilo’s quote isn’t wrong in lending practices. If a lender knows their client, they should be able to have underwriting discretion.
This is the whole concept of personal banking: know your client and do things for them based on their whole financial picture—income, employment, assets, debts, reserves, credit score, career/family track, etc. Obviously Countrywide is the poster child for a system that took this concept WAY too far, but still, common sense lending got lost in the wake of the bust. And many responsible borrowers now suffer as a result.