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IBDeditorials.com: Editorials, Political Cartoons, and Polls from Investor's Business Daily -- Messy Mortgages

Messy Mortgages

By INVESTOR'S BUSINESS DAILY | Posted Tuesday, June 17, 2008 4:20 PM PT

Scandal: A number of top Democrats have been caught with their hands in the cookie jar, suggesting corruption in the party linked to the recent home-mortgage meltdown. Will the mainstream media just ignore it?

Read More: Election 2008

The firing of Democrat insider and money-man Jim Johnson a week ago as head of Barack Obama's vice presidential search committee came as no surprise. Johnson, who served as chairman and CEO of Fannie Mae during much of Bill Clinton's presidency, was discovered to have received a favorable mortgage loan from Countrywide Financial's founder and CEO Angelo Mozilo.

This was bad enough. After all, Obama has railed specifically against Mozilo's company, accusing it of taking advantage of ignorant borrowers to make subprime loans it knew wouldn't be paid off and then selling the loans to the quasi-governmental Fannie Mae mortgage agency.

At one point, he even demonized Mozilo for "infecting the economy and helping to create a home foreclosure crisis."

Now it turns out that Johnson wasn't the only Democratic F.O.A. — friend of Angelo.

Sen. Chris Dodd of Connecticut, head of the Senate Banking Committee that oversees Countrywide, also was a recipient of Mozilo's mortgage largesse. So was Kent Conrad, the North Dakotan who chairs the Finance Committee and sits on the Budget Committee.

Both Dodd and Conrad, like Johnson, had potential clout in crafting legislation and regulations that would directly affect Countrywide's future. And both got favorable loans through Countrywide's now-infamous "V.I.P." program.

Dodd's case is illustrative. He took out two mortgages with no closing costs attached, at fixed rates of 4.25% and 4.5%. Sound like something you'd get?

Conrad didn't even know Mozilo. But he phoned him anyway, and got a great deal: a low-interest, virtually no-cost loan to buy a $1 million beach getaway. Favoritism? No way, says Conrad.

Nor were Conrad and Dodd alone. Former Health and Human Services Secretary Donna Shalala and former U.N. ambassador and assistant Secretary of State Richard Holbrooke also benefited, as did one prominent Republican — former Secretary of Housing and Urban Development Alphonso Jackson.

Granted, both Shalala and Holbrooke had left public office when they got their deals. But it was reasonable for Mozilo to think they'd serve again in another Democratic administration.

And what, many wonder, was the quid pro quo for all this?

Just a month ago, in unusually harsh language, Dodd ripped into President Bush on the subprime mess and defended a $400 billion plan that would bail out the subprime lending industry — including Mozilo.

Friends of Angelo, indeed.

These sweetheart deals cry out for an investigation. Rep. Jeb Hensarling, R-Texas, does too. On Wednesday, he called for hearings to find out who in Congress got "preferential treatment" on mortgages with Countrywide, the nation's largest home lender.

The Democrats' initial response has been to stall. They hope the problem will disappear until after the election. Given the media's lack of curiosity so far — a small handful of news organizations, including our competitor, the Wall Street Journal, have pushed this story ahead — it looks like the Democrats might get their wish.

But the problem won't go away, and neither will we.

These revelations suggest that, at the very least, the Democratic Party is afflicted with a kind of corruption that taints all recent decisions on the subprime crisis. They need to investigate it fully, immediately and without prejudice — or risk having it blow up in their faces.