Parties nail details for lending probe

Republicans and Democrats on the House Oversight and Government Reform Committee reached an agreement late Friday on the details of an investigation into a VIP mortgage-lending program that could implicate several members of Congress and other Washington power players.

Earlier in the afternoon, Rep. Edolphus Towns (D-N.Y.), who chairs the panel, announced a wide-ranging probe into the role mortgage lenders played in the global financial meltdown and economic crisis. As part of the larger investigation, Towns said he planned on sending subpoenas to Countrywide.

{mosads}He did so after months of pressure from Rep. Darrell Issa (R-Calif.), who began investigating Countrywide in late 2008 and started uncovering the inner workings of its Friends of Angelo program — named for CEO Angelo Mozilo. The program allegedly provided special deals to influential officials and lawmakers at the state and federal levels.

As a member of the minority, Issa did not have subpoena power and repeatedly reminded Democrats that Bank of America, which now owns Countrywide, had said it would produce requested documents only if subpoenaed.

Towns took out two mortgages from Countrywide but has insisted that he received no special favors.

Democratic Sens. Christopher Dodd (Conn.) and Kent Conrad (N.D.) have faced scrutiny for their participation in Countrywide’s VIP program. In August, the Senate Ethics Committee concluded that neither senator had knowingly benefited from the program, but said both should have “exercised more vigilance” about the inevitable perception of special treatment.

The Friday night agreement between Towns and Issa came after a week and a half of intense partisan sniping and retaliation. Towns canceled a planned committee mark-up meeting last week when Issa threatened to call for a vote on the Countrywide subpoenas. Republicans showed up for the meeting and videotaped the Democrats’ empty chairs and posted a video on their webpage.

Democrats then changed the locks on the Committee hearing room so Republicans could not enter without Democrats present. They said they did so because the Republicans “could not behave.”

Issa did not back down and threatened to continue calling for subpoena votes at Oversight Committee hearings and subcommittee meetings until the Democrats relented. By mid-week, Towns and Issa started discussing details of how subpoenas should be written.

When Towns announced the larger investigation, he said he would subpoena records from Countrywide, but would direct any results of the subpoenas relating to members of Congress to the House Ethics Committee because the Oversight Committee does not have the power to police members of Congress.

“We need to clarify unanswered questions about Countrywide Financial’s VIP program, so I am issuing a subpoena to gather information about how that program worked and whether it provided special benefits to government officials,” Towns said in a statement Friday. “I am prepared to issue additional subpoenas if other companies fail to respond to our document requests.” 

Hours later, however, Republicans said talks had broken down and no agreement on the Countrywide subpoenas had been reached.

“No subpoena has been issued and no agreement has been reached,” said Frederick Hill, an Issa spokesman. “Majority and minority staff members continue to discuss a draft subpoena put forth by the majority.”

Late Friday night the two sides reached a deal finalizing details of the Countrywide subpoena.
 
“We will uncover the true motive and intent behind Countrywide’s actions and learn the full size and scope of how this program influenced policymakers and their policy decisions,” Issa said in a statement. “The fact of the matter is we cannot fully understand the failure of government if we do not expose the failure of government officials led by an attempt to bribe them.”

The subpoena forces Bank of America to produce documents by Nov. 13. The committee has demanded a broad range of documents, including e-mails, for covered VIP borrowers, including those that were “Friends of Angelo” and those serviced by Branch 850, Countrywide’s special VIP branch. It also demanded all documents and emails between Countrywide officials discussing the motive and intent of the program, and all telephone recordings between covered borrowers and Countrywide employees.

They defined “covered borrowers” as a person or their spouse who at the time of the loan was an officer or employee of a federal agency, a member of officer of the House, an employee of the House, an officer or employee of a GSE, or an officer or employee of a state and local government.
 
Towns had originally said he did not want to open an investigation into Countrywide’s VIP program out of deference to the Justice Department, which reportedly has its own probe under way.

The House Ethics Committee also has a history of shutting down existing investigations when a conflict with the Justice Department arises. In this case, the political pressure to act could make it difficult for the ethics panel to avoid an intensive probe.

Democratic leaders, however, worry that any dramatic findings could implicate several lawmakers, including prominent Democrats, and lead to a far-reaching scandal similar to the House banking controversy of the early 1990s, when it was revealed that the House allowed members to overdraw their House checking accounts without being penalized by the bank. The scandal implicated 22 members, and some political observers argue it contributed to Democrats losing the majority in 1994.