Fannie Mae, Freddie Mac, and the Destructive Power of Politically Correct Intentions

A first-rate essay at Philanthropy Daily reports on a book from New York Times reporter Gretchen Morgensen and housing finance expert Joshua Rosner, Reckless Endangerment: How Outsized Ambition, Greed, and Corruption Led to Economic Armageddon.  Although it comes with immaculate center-left credentials, it places the blame for the cratering of the housing market — and the great American financial collapse of 2008 — squarely on the ideology of structural racism and the way in which this was leveraged to justify abandoning responsible lending standards in favor of politically correct measures to increase minority homeowner rates.

When then Secretary of Housing and Urban Development (now Governor of New York) Andrew Cuomo launched “new and aggressive affordable housing goals for Fannie and Freddie” in 1999, he predicted it would “help reduce the huge homeownership gap dividing whites from minorities.”  President Clinton was pleased.  Morgenson and Rosner write:

Regulators were relaxing rules, Fannie and Freddie were inflating their portfolios, homebuilders and subprime lenders were flexing their muscles too. To meet the goals Fannie and Freddie had to buy riskier mortgages, such as those defined as subprime.

Some $160 billion in subprime loans would be underwritten in 1999, up from $40 billion five years earlier. And in another four years, that figure would jump to $332 billion.
Many of those loans wound up in Fannie’s and Freddie’s portfolios. By 2008, some $1.6 trillion of toxic mortgages, or almost half of those that were written, were purchased or guaranteed by Fannie and Freddie.

The essentials of the story, says Scott Walter, are “oceans of tax dollars flowing to private groups – for-profit and nonprofit – that are praised by politicians who want credit for the subsidized housing boom, with the whole party lubricated by the dissolving of traditional lending practices, which in turn is justified by claims that unfettered lending will remedy racial disparities in housing.”  Advocates of “structural racism” cite those disparities as evidence of systematic discrimination against minorities, and Fannie and Freddie were given a new charter, new powers, and so further distorted the housing market by innoculating banks against the risks of reckless lending practices when they were lending to minorities.  It’s the law of unintended consequences at its most thoroughly destructive.

ACORN — the Association of Community Organizations for Reform Now, a key ally for Fannie/Freddie, the Democratic party, and, as it happens, Barack Obama — was instrumental in helping the federal government draw up the blueprints for its social engineering.  A later-discredited study from the Boston Fed fueled the rage of accusing the housing industry of endemic racism, and became more reason to expand Fannie/Freddie power.  Then, as the power of government expands, so do the opportunities for corruption with organizations like ACORN and politicians who enjoy sweetheart mortgage deals, bottomless pits of campaign cash and the aura of social justice.

[A]s Congress mulled over the company’s future, Fannie Mae began making significant grants, hundreds of thousands of dollars each, to consumer and community groups favoring increases in low-income housing. The groups, such as the Association of Community Organizations for Reform Now, or ACORN, had been agitating for tighter regulations on Fannie Mae. But after receiving the grants, ACORN and most of the other groups changed their tunes.

James Johnson established a massive slush fund to curry favor with politicians like Barney Frank, community organizations like ACORN and special interest groups like the National Council of La Raza, and then leveraged all of them to continue expanding their charter for more and more lending at greater and greater risk, all of which led to hundreds of millions of dollars in bonuses for James Johnson.  So Morgenson and Rosner:

Even nonpolitical neighborhood groups funded by the Fannie Mae Foundation helped the company play its power game. When a nonprofit applied for funding from the foundation, it had to supply a list of political contacts within their area or organization. These contacts gave Fannie Mae a roster of influence that grew to four thousand names at its peak.

The army of partisans was called to arms whenever someone in Congress had the audacity to suggest that Fannie and Freddie ought to reduce the size of its exposure — and thus you ended up with people like Barney Frank denying that there was any problem at all, right up to the point where the whole system imploded.

Listen, I’m not saying there were no other contributors, even major contributors on both sides of the aisle, to the housing collapse and the ensuing financial crisis.  There were.  But it’s not hard to understand how (1) chartering the government-sponsored entities and encouraging the banks to walk further and further down the plank of subprime home loans, while (2) insulating them from the dangers of their risky lending practices by purchasing the subprime loans and backing up the loans with implicit promises was just a recipe for disaster.  Ultimately the scheme exploded and did incalculable harm to those it was meant to help.  As Walter writes, the “villians” of both parties “enriched themselves, while bringing far more hardship to the poor and minority Americans whose struggles were used to justify the scams.”  Now, in the midst of the financial crisis, African-American and Hispanic-American households are arguably worse off than they have ever bee

The expansion of opportunities for corruption, and the extraordinary harm caused by unintended consequences, explains as eloquently as possible the dangers of a large and ever-expanding government.  These are not abstract concerns.  The African-American community stands decimated, in part, because of the exploitation of honorable intentions.

What's Causing the American System to Fall Apart

I don’t agree with all of her recommendations — I think she shows a little too much fondness for regulation, for instance — but I agree with Sheila Bair on one of the primary causes of our current financial turmoil and the inability of the political class to address it: what she calls “short-termism.”  She writes:

The nation is still struggling with the effects of the most serious financial crisis and economic downturn since the Great Depression. But Wall Street seems all too ready to return to the same untenable business practices that brought it to its knees less than three years ago…Too many industry leaders, as well as some government officials, compare the crisis to a 100-year flood. “Who, us?” they say. “We didn’t do anything wrong. Nobody saw this coming.”

The truth is, some of us did see this coming. We tried to stop the excessive risk-taking that was fueling the housing bubble and turning our financial markets into gambling parlors. But we were impeded by the culture of short-termism that dominates our society. Our financial markets remain too focused on quick profits, and our political process is driven by a two-year election cycle and its relentless demands for fundraising.

I’ve had a unique vantage point during my five-year term as chairman of the Federal Deposit Insurance Corp., from the early failure of IndyMac Bank to the implementation of reforms designed to ensure that no conglomerate ever again is deemed “too big to fail.”

Now that I’m stepping down, I want to sound the alarm again. The common thread running through all the causes of our economic tumult is a pervasive and persistent insistence on favoring the short term over the long term, impulse over patience. We overvalue the quick return on investment and unduly discount the long-term consequences of that decision-making.

Our decades-long infatuation with financing our spending through ever-growing debt, in the private and public sector alike, is the ultimate manifestation of short-term thinking. And that thinking, particularly in business and in government, is actually getting worse, not better, as we look for solutions to put our economy on a sounder footing.

Bair is one of the few people who came out of the financial crisis smelling like roses.  It’s worth hearing her thoughts.  Read the piece in full.

2008 was "Change"; will 2012 be "Change it Back"? — The Morning Report, 7/12/11

In the News

1.  James Pethokoukis on what will, I’m quite sure, be the central Republican argument in the 2012 election battle:

The Republican charge is a body shot aimed right at the belly of President Barack Obama’s re-election effort: He made it worse.

No, not that White House efforts at boosting the American economy and creating jobs and “winning the future” were merely inefficient or wasteful, which they certainly were. Even Obama finally seems to understand that. “Shovel-ready was not as shovel-ready as we expected,” he joked lamely at a meeting of his jobs council.

Rather, that the product of all the administration’s stimulating and regulating is an economy that’s in significantly worse competitive and productive shape than when Obama took the oath in January 2009. He was dealt a bad hand, to be sure – and then proceeded to play it badly. At least, that is what Republicans have been saying. “He didn’t cause the recession as we know,” presidential candidate Mitt Romney said in New Hampshire yesterday. “He didn’t make it better, he made things worse.”

It’s a devastating piece from Pethokoukis, who is not exactly an Obama-hater.  He assesses the results of the President’s massive stimulus and other efforts:

[Read more...]

Morning Report, August 26th: The Last Lion, the Christian Mafia, the Living Lockerbie Bomber, and the Lost Work Ethic

One Christian’s perspective on the day’s news.

1.  Senator Edward Kennedy passed away last night from brain cancer.  The senior Senator from Massachusetts was regarded by friends and foes alike as one of the kindest and hardest working Senators in the Senate. President Obama released a statement saying: “An important chapter in our history has come to an end. Our country has lost a great leader, who picked up the torch of his fallen brothers and became the greatest United States Senator of our time.”  Whether the influence of his policies was for the better or not, he was certainly the most consequential Senator of the past 50 years, at least if consequence is counted in the sheer amount of legislation moved into law.  Kennedy may very well have been President if it were not for the Chappaquiddick fiasco and poor timing, but it was precisely the immoral and cowardly acts of that day, some argue, that drove Teddy to work so hard to compensate for his sins.

It is easy to point to personal and political failures, and to what some regard as hypocrisy (his opposition to wind power off the coast of Cape Cod), but it is even easier to point to genuinely worthwhile efforts which Kennedy led or assisted (expanded funding for higher education, nuclear arms control, etc.).  A 2009 survey by The Hill, a Capitol Hill publication, found that Senate Republicans believed Kennedy was the chamber’s easiest Democrat to work with and most bipartisan.  His kindness to his staffers sets the standard.  John McCain called Kennedy “the single most effective member of the Senate if you want to get results.”

Michael Scherer reflects on the most famous moment in Kennedy’s most famous speech.  The video is here:

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Whether Right or Left, we can all hope that he will rest in peace.

2.  “The Fellowship” (sometimes called “The Family”) has received a substantial amount of critical attention in the press recently, partly because of government leaders who participated in Fellowship Bible studies at their C Street property in Arlington, VA., and yet succumbed to temptations and sinned.  The Fellowship is reviled and feared on the Christian Left, at least among those who don’t know much about it, and is often portrayed as essentially advocating a theocratic notion of government.  It even inspires conspiracy theories similar to those surrounding the Freemasons or the spurious Protocols of the Elders of Zion.

Most reporting on The Fellowship comes from deeply skeptical sources, whether the elite secular media (The New York Times, NPR, etc.) or recently writers such as Jeff Sharlet, who went “undercover.”  Sharlet’s writing is filled with atmospherics and foreboding words, taking rather ordinary statements (and some extraordinary ones) and making them sound like they could have been spoken by Hitler himself.  Joking self-references as the “Christian mafia” are turned into serious statements, and the need for privacy, which would seem obvious when you are talking about world leaders confessing their sins and seeking support and accountability, is turned into something dark and sinister.  Thus Sharlet “exposes” how The Fellowship has developed “friendships” with dictators.  Yet The Fellowship largely sees itself as a relationship-building ministry, and hopes that building relationships between people of faith will help to resolve conflicts and bring greater justice to the world.  The Fellowship is involved behind the scenes, through the relationships it has built, in trying to address world conflicts, and played a significant role in the Camp David accord.  Its mission statement is: “To develop and maintain an informal association of people banded together, to go out as “ambassadors of reconciliation,” modeling the principles of Jesus, based on loving God and loving others. To work with the leaders of other nations, and as their hearts are touched, the poor, the oppressed, the widows and the youth of their country will be impacted in a positive manner.”  I think a lengthy quotation is warranted:

So I’ve always suspected the reporting on The Fellowship is largely overblown, simply because I know how the media treats devout and evangelistic Christian groups.  Christianity Today has a feature on The Fellowship that is very much worth reading.  It is from two members, Frank Wolf and Tony Hall.  They write: “For over 25 years we have participated in one of these prayer groups. Small groups are not unique to “the Fellowship,” for they have been a part of Christian community since the time of Jesus. Our own small group is composed of Republican and Democratic members of the Congress, some of whom are now retired. We leave our labels at the door, and we enjoy an hour of reading the Scriptures, personal updates, and prayer. In times of personal and professional crises, these friends have stood by each of us regardless of party affiliation. They did this at their own cost and sometimes at professional risk, but they believe that “there is no greater love than to lay down your life for your friend” (John 15:13).

There are many such groups on Capitol Hill, in Washington, and throughout the nation, where men and women come for accountability and spiritual support. In these groups every participant has an equal voice and is equally valued, with no regard for public or professional status. Some of the groups in which we have participated have included policemen, pastors, journalists, businessmen, and the unemployed. They often include people from opposing parties and different races or walks of life, all with a common goal of spiritual growth.

Friends from these small groups are more than just encouragers for an hour a week, for they often become extended family to one another, thus the informal use of the term “family.” It is always refreshing to walk into a room where we are valued for our humanity, with no reference to having been a Congressman and an Ambassador; where we matter to God and to brothers and sisters, rather than to lobbyists and activists; where we are asked about the issues of our hearts, such as our marriages and children, rather than our position on taxes; and finally where we matter because God loves us, rather than because we will vote for or with someone.

This seems like precisely the sort of thing that Christians of all political persuasions–Left, Right and center–should affirm and celebrate.  James Inhofe: Inhofe, 74, attends a weekly Fellowship study that does not meet at C Street: “We talk about our families, we talk about our backgrounds, we talk about our faith. We get together and support each other and pray together. There is nothing new and sinister about this.”

Yet there are elements that could be improved.  World Magazine has a balanced take, dismissing the conspiracy theories and yet remaining critical of The Fellowship for what seems to be an ill-defined theology and ecclesiology.  Neither Abraham Vereide nor Doug Coe, the founder and long-time leader respectively, had theological training.  The son of another of the group’s leaders, Chris Halverson, has a trenchant observation that “the gospel of the cross” has become, in the precincts of The Fellowship, “the gospel of the Church triumphant.”  One wonders whether he read Kierkegaard’s critique of the established church, since it was precisely this abandonment of the ecclesia militans for the ecclesia triumphans that concerned him.

As D. Michael Lindsay (whom I will interview on Friday) writes, the Fellowship is “sort of a free-floating spiritual formation group” that “is very indifferent to local churches.”  In addition to “a number of issues raised about their theology,” there are “elements of the Fellowship which indeed are not in line with what we would consider mainstream evangelical theology.”  In research for his book Faith in the Halls of Power, Lindsay discovered that lawmakers mentioned the Fellowship more than any other organization when asked to name a ministry with the most influence on their faith: “It has relationships with pretty much every world leader—good and bad—and there are not many organizations in the world that can claim that.”

3.  Probably the most disturbing number in the mid-year economic report issued by the White House is the prediction that next year’s deficit will equal $1.5 trillion.  And while the White House estimates that the average unemployment for fiscal 2009 will be 9.3%, the average for fiscal 2010 is estimated at 9.8.  I cannot harp on the White House for being wrong on its economic projections.  The economy is difficult to predict.  But they’re being disingenuous when they try to hide in a crowd and say that this recession is worse than all economists expected it would be.  There was always distance between the White House and the crowd.  The White House projections were far rosier than those made by independent institutions like the CBO — and their rosy projections had more than a whiff of political opportunism, as it has benefited the White House to understate the severity of the crisis in order to keep people on board with the massive expenditures it has authorized or sought to authorize.

4.  Interesting: overall charitable giving is down as the economy continues to struggle, but religious giving is up.

5.  Yesterday, my interview of Jedd Medefind went live at Patheos’ Evangelical Portal.  Jedd was the director of Bush’s Office of Faith-Based Initiatives, and now he is the President of the Christian Alliance for Orphans.  He spoke in deliberate, careful, beautiful prose.  I was very impressed, and I thought he got right to the heart of issues with adoption and orphan care.  Please read it.

6.  Bombshell claim.  Looks like the claim that the Lockerbie bomber would die of prostate cancer in a matter of weeks may only have been a convenient story.  Only one doctor, who was not a specialist in the relevant area, was willing to say that al-Megrahi was dying soon.  As Ed Morrisey writes at Hot Air, “It turns out that other doctors had been consulted in the case, none of whom were willing to say that Megrahi was even dying from the disease.  In fact, one said he seemed suspiciously asymptomatic for a patient with the kind of diagnosis that Scotland asserted.”  Were the Scottish hoodwinked by the Libyans?  Or were they furnishing an excuse for a release that was really sought for other grounds?

7.  Speaking of Ed Morrisey, his account of the Minnesota Senate race recount, which led to the victory of Al Franken, is worth reading–or at least the portion of it which can be read online.  As Morrisey argues, Franken did not do anything illegal, and did not “steal” the election, and in fact such language is unhelpful.  Rather, the lesson politicians should draw is this: “Gone are the days when Congressional and especially Senate recounts will get conducted as a collegial effort between two candidates who want to act as referees as well as litigants.  Both sides had better be prepared for a process that looks a lot more like a lawsuit — or maybe a divorce — than anything else.  That includes preparation for a recount in races that look close months before the election.  Franken did all of these things, which is the reason he’s sitting in the Senate now.”  In other words, “Coleman was outboxed.”  The other side took a more aggressive approach from the start.  Of course, the very reason Franken took such an approach is because the Left was convinced that the Right had in fact stolen elections in brass-knuckles recount fights.  So perhaps there is an issue of perspective here.

8.  Cal Thomas at the Christian World Magazine reviews a book, by Martin Gross, that sounds very much worth reading, on the various ways in which the American government (regardless of the party in power) has become feckless and unable to serve us well.

9.  It appears that Hamid Karzai will win the Afghan election.  The bigger question is whether Afghanistan will rupture in the aftermath, and whether we can help the government root out corruption and extend its power beyond the cities in order to occlude the Taliban.

10.  Chuck Grassley does not sound optimistic about the chances for a bipartisan compromise on health care reform.  He makes a legitimate criticism of the White House for not setting forth its own proposed legislation on the issue and instead leaving the issue to multiple committees so that there is confusion on what is really being discussed.  Meanwhile, Joe Klein condemns as “lower than dirt” those who suggest that such health care reform will result in rationing that could prove detrimental to those, for instance, with breast cancer.  Yet, even though this sort of rationing is not set forth explicitly in the bill(s) under discussion, it is a justified concern that rationing will be the consequence nonetheless–as it has been in other countries.  This is just another illustration of the fundamental presuppositions dividing the two sides on the health care debate.  One side assumes that this is a step in the direction of nationalized health care, and therefore speaking of the negatives of nationalized health care is entirely legitimate.  On the Left, however, there are those who very much hope that this leads in the direction of national health care, and those, like Klein, who point out that the current proposals do not constitute national health care.  From Klein’s perspective, then, speaking of the ‘evils’ of nationalized health care is deception and demagoguery.  For those on the Right who believe we are moving toward socialized medicine, however, on the basis of this supposition it is not at all deceptive to speak of those ‘evils’.

In other words, to say that the current legislation does not explicitly authorize funds for abortion, does not mention illegal aliens, and does not speak of ‘death panels’ that would determine which life-saving measures are worth the cost is not to say that the legislation could not lead to government funding of abortion (which, as many have recognized, it certainly would), to expanded coverage of illegal aliens or to ‘rationing’ by government bureaucrats.  This is what Democrats have to address.  Saying “it’s not in the bill” does nothing to remove the fear that “it will be the consequence of the bill.”  Rather than calling the other side liars, un-American, racist, and idiotic, they should address the presuppositions that divide the two sides.

11.  Today’s Two-Sides.  From the Left, Andrew Sullivan condemning the enhanced interrogation conducted during the Bush administration; I hesitate to recommend Sullivan’s entry, since it is about as rabidly partisan as one can be.  He twists Peter King’s words beyond recognition, and conflates the issues of the enhanced interrogation program and the kind of prisoner abuses (beatings, etc.) that always occur when a sufficient number of people are jailing a sufficient number of prisoners.  Sullivan also has little tolerance for nuance or perspective, and exaggerates pretty wildly:

“Indeed, much of the American people, especially evangelical Christians, expect less in terms of human rights from their own government than Iranians do of theirs’. In fact, American evangelicals are much more pro-torture in this respect than many Iranian Muslims.  This is what Bush and Cheney truly achieved in their tragic response to 9/11: two terribly failed, brutally expensive wars, the revival of sectarian warfare and genocide in the Middle East, the end of America’s global moral authority, the empowerment of Iran’s and North Korea’s dictatorships, and the nightmares of Gitmo and Bagram still haunting the new administration.  But what they did to the culture – how they systematically dismantled core American values like the prohibition on torture and respect for the rule of law – is the worst and most enduring of the legacies.  One political party in this country is now explicitly pro-torture, and wants to restore a torture regime if it regains power.”

Blaming the Bush administration for all these things is, well, more than a stretch, but Obama has said that Andrew Sullivan is a favorite blogger.  Obviously those who abused prisoners should be prosecuted, and many have.  Whether waterboarding was justified in the three cases in which it was used is a difficult question to answer, and people of good will can differ.  I’m glad that waterboarding was used on only three individuals, and that its use was discontinued.  I expect my government not to torture; I guess I must not be an evangelical, by Andrew Sullivan’s lights.

On the Right, consider Marc Thiessen at the Wall Street Journal.  Thiessen points to abuses just as bad that occurred at New York youth detention facilities, making the point that prisoner abuse seems to happen whenever there are prisoners, and the Bush administration is not the first administration under which such abuse has happened.  Then, he writes:

While officials at the New York state detention facilities failed to report the abuses (“the ombudsman’s office charged with overseeing the youth prison centers had virtually ceased to function,” the Times reported), the CIA inspector general’s report describes a well-run, highly disciplined CIA interrogation program, where clear guidelines were established and abuses or deviations from approved techniques were stopped, reported and addressed.

Indeed, the CIA report makes clear from its first paragraphs that it was those who ran the program who brought abuses to the IG’s attention: “In November 2002, the Deputy Director of Operations (DDO) informed the Office of Inspector General (OIG) that . . . he had just learned of and had dispatched a team to investigate [REDACTED]. In January 2003, the DDO informed OIG that he had received allegations that Agency personnel had used unauthorized techniques with a detainee, Abd Al-Rahim Al-Nashiri . . . and requested that OIG investigate.”

Once the IG report was completed, the agency referred it to the Justice Department for review for possible criminal prosecutions. This review was conducted not by Bush political appointees. It was conducted by career prosecutors from the Eastern District of Virginia. They recommended against prosecutions in all but one case—that of a CIA contractor, not in the official interrogation program, who had beaten a detainee in Afghanistan. (The detainee later died and the contractor was subsequently convicted of assault.)”

12.  Column of the Day: Steven Malanga at the City Journal, echoing my own article on the Moral Dimensions of the Financial Collapse, argues that a flourishing capitalistic market requires a certain constellation of moral virtues–a strong work ethic among them.  Three paragraphs from Malanga’s article:

The genius of America in the early nineteenth century, Tocqueville thought, was that it pursued “productive industry” without a descent into lethal materialism. Behind America’s balancing act, the pioneering French social thinker noted, lay a common set of civic virtues that celebrated not merely hard work but also thrift, integrity, self-reliance, and modesty—virtues that grew out of the pervasiveness of religion, which Tocqueville called “the first of [America’s] political institutions, . . . imparting morality” to American democracy and free markets. Some 75 years later, sociologist Max Weber dubbed the qualities that Tocqueville observed the “Protestant ethic” and considered them the cornerstone of successful capitalism. Like Tocqueville, Weber saw that ethic most fully realized in America, where it pervaded the society. Preached by luminaries like Benjamin Franklin, taught in public schools, embodied in popular novels, repeated in self-improvement books, and transmitted to immigrants, that ethic undergirded and promoted America’s economic success.

What would Tocqueville or Weber think of America today? In place of thrift, they would find a nation of debtors, staggering beneath loans obtained under false pretenses. In place of a steady, patient accumulation of wealth, they would find bankers and financiers with such a short-term perspective that they never pause to consider the consequences or risks of selling securities they don’t understand. In place of a country where all a man asks of government is “not to be disturbed in his toil,” as Tocqueville put it, they would find a nation of rent-seekers demanding government subsidies to purchase homes, start new ventures, or bail out old ones. They would find what Tocqueville described as the “fatal circle” of materialism—the cycle of acquisition and gratification that drives people back to ever more frenetic acquisition and that ultimately undermines prosperous democracies.

And they would understand why. After flourishing for three centuries in America, the Protestant ethic began to disintegrate, with key elements slowly disappearing from modern American society, vanishing from schools, from business, from popular culture, and leaving us with an economic system unmoored from the restraints of civic virtue. Not even Adam Smith—who was a moral philosopher, after all—imagined capitalism operating in such an ethical vacuum. Bailout plans, new regulatory schemes, and monetary policy moves won’t be enough to spur a robust, long-term revival of American economic opportunity without some renewal of what was once understood as the work ethic—not just hard work but also a set of accompanying virtues, whose crucial role in the development and sustaining of free markets too few now recall.

More tomorrow.

Dodd, Duplicity and Federal Oversight

Since we have had several articles on the financial crisis on the Evangelical Portal at Patheos (see here and here), I just wanted to issue a quick note that Senators Dodd and Conrad, both of whom were tasked with oversight of banking and mortgages, are exposed now to have had deep conflicts of interest.  Angelo Mozilo rose from the butcher shop in which he was raised to being the head of Countrywide, which pushed harder than any other mortgage lender into the subprime market, inflating the bubble that later burst on all of us.  Mozilo himself made hundreds of millions of dollars before Countrywide and IndyMac collapsed and destroyed many billions of dollars in American wealth.

Mozilo gave sweetheart deals to powerful people, including Congressmen and Senators (“friends of Angelo”), on their own mortgages–two mortgages apiece from Countrywide.  Dodd heads the Banking Committee and Conrad the Budget Committee.  These are precisely the same people who were supposed to supervising and regulating the housing and financial markets–precisely the ones who were supposed to be keeping an eye on people like Angelo Mozilo–and they, knowingly, received mortgages from Mozilo that were well beneath the market rate.

That these are Democratic Senators is not the point.  Every Congressperson and Senator who profited personally from turning a blind eye toward the financial and housing markets should be run out of town.