This week the Senate will continue debating a housing bill intended to bring some relief to the millions of American homeowners facing foreclosure because of the credit crisis that has become the hood ornament on a U.S. economy headed south. More than 1.5 million people have already lost their homes and there are more than 8,000 new foreclosure filings every day. This July, when rates reset on millions of adjustable-rate mortgages, the pain is only going to go deeper and spread wider.
"Almost one in every eleven homes in our nation with a mortgage in this country is in default or foreclosure at the end of March. That's the highest level since the Mortgage Bankers Association began tracking the foreclosures in 1979," Sen. Chris Dodd said on the Senate floor on Thursday. "By almost any measure, by any measure, Americans are struggling more and more than any point in recent memory."
True enough, but even as they work on providing homeowner relief, Democrats need to very quickly address their little "Countrywide problem," which hurts their credibility and exposes them to great political risk. This is the, so far, mini-scandal in which Dodd and other high-powered Democrats got special treatment on mortgages from Countrywide Financial Corporation, the controversial mortgage lender at the heart of the sub-prime mortgage crisis.
Dodd said he knew he was getting special treatment, but he thought it was because he was a longtime customer, rather than a powerful friend of Countrywide's CEO, Angelo R. Mozilo. "As a United States senator, I would never ask or expect to be treated differently than anyone else refinancing their home," Dodd said in statement, expressing his own outrage.
Another senator, Kent Conrad, said he didn't know he was getting any special treatment even though he admitted calling Mozilo about the loan.
The Countrywide episode has already cost Barack Obama the top adviser to his vice-presidential search effort, Jim Johnson, the former head of Fannie Mae, who resigned after the The Wall Street Journal reported on loans Johnson got from Countrywide. This week, Conrad said the Senate ethics committee was welcome to all the paperwork he had on loans he got from Countrywide, and the North Dakota Democrat said it was Jim Johnson, who referred him to Mozilo when he was thinking about a loan to finance the purchase of a vacation home in Bethany Beach, Delaware in 2002.
Obama wasted no time in getting rid of Johnson, and Dodd and Conrad need to put the question to rest quickly. This, like the House banking scandal of 1992, is exactly the kind of trouble that can hurt Democrats most. This is not some arcane, abstract political discussion -- soft money versus hard money or campaign expenditures versus independent expenditures. People understand what is involved in getting a mortgage; they understand how one percentage point can make a difference; they understand how the fees add up and what it would mean to have them waived. So they are able to tell when powerful people are gaming the system, using influence to secure advantages unavailable to the ordinary person.
And they especially know it now, when times are tough and getting tougher.
Already, Republicans are seeking to use the Countrywide episode for political advantage. There are calls for hearings in the House and Senate, and a small group of Senate Republicans, led Jim DeMint of South Carolina, tried to slow the bill last week, raising questions about whether the bill represented a bailout for Countrywide. "This bill has come together in such a way as to raise questions all over this country that we need to answer before we move ahead," DeMint said.
So far, a broad bipartisan coalition in the Senate supports the housing bill and rejected DeMint's effort to stall it. But one real worry, of course, is that there are more Democrats sitting on Countrywide loans with especially sweet terms and that we will learn about them in July and August and September. That would be a tough story to deal with given the economic climate.
As Dodd himself put it last week: "Quite simply, we are living through the worst housing market since the great depression of the 1920s and 1930s. Residential construction in the United States fell by over 30 percent in the first quarter of this year. Sales of existing homes fell by 13 percent over the past year."
These are not the conditions under which one would like to be defending the privileges of a cozy relationship with Coutrywide. Mozilo was paid $22.1 million last year and cashed in $121.5 million in stock options, at the same time his company was posting losses of $700 million and seeing its stock price drop by 80 percent.
Columnist Rick Green of the Hartford Courant, the largest paper in Dodd's home state, had what might be a common reaction to the news. "When you are U.S. Sen. Chris Dodd, VIP, and you want a mortgage from Countrywide Financial, it appears to mean all kinds of fees are waived and the deal is sweeter than for anyone else who walks in the door. That is the difference between us poor suckers with millstone mortgages hanging around our necks and VIP Dodd."
Democrats need to hope that Dodd and Conrad provide satisfactory answers to the obvious questions and put this discussion to rest as quickly as possible. Admitting a mistake would not be the worst thing in the world. They need to pass the housing bill so that people can start feeling some relief soon.
When the Senate began debate on the housing measure last week, Dodd was full of his usual fire, insisting that this bill was the most important business before the Senate. "There is no other issue which demands our attention and our action more than this one ... This is a cancer in our society and it is causing us deep problems. We need to do something about it."
He is right. But he also needs to do something about his Countrywide loan to make sure that it does not become part of the ongoing debate as well.
