Daniel Goldman, writing for Conde Nast's Portfolio, has breathed fresh life into the 'Friends of Angelo' scandal at Countrywide Corp. Senators Christopher Dodd and Kent Conrad refinanced properties through Countrywide’s “V.I.P.” program in 2003 and 2004, according to company documents and emails and a former employee familiar with the loans. Other participants in the V.I.P. program included former Secretary of Housing and Urban Development Alphonso Jackson, former Secretary of Health and Human Services Donna Shalala, and former U.N. ambassador and assistant Secretary of State Richard Holbrooke.

First, like I said here, Mozilo is neck deep and the water's rising. Second, a whole lot of people in Washington are about to submit resignations citing 'health' or 'wanting to spend time with family' reasons. Because what Daniel Goldman has done is not only to name names, but also set off a beehive full of journalists who will now start poking into every corner of Countrywide to find more noteworthy names who got these FOA loans or VIP loans or whatever you want to call them.

For the record, its not exactly as if all these people did something criminal, like accept bribes. Its just the appearance of impropriety that will put an end to their careers. For example, Sen. Chris Dodd (D-CT) is Chairman of the powerful Senate Banking Committee, and he also had an outside chance of a position in a future Democratic Administration, all of which has now effectively evaporated.

This inspite of the fact that Dodd's spokesman Bryan DeAngelis categorically denied that the Senator had recieved any preferential treatment for his mortgages. "The Dodds received a competitive rate on their loans. They did not seek or anticipate any special treatment and they were not aware of any." The Portfolio article quotes Dodd's wife, Jackie Clegg, as saying that "two other that two other lenders they checked with offered comparable interest rates."

Here's the bottom line. Even if the accusations are true and he got a sweetheart deal, what Sen. Dodd saved is $58,000 on one loan and $17,000 on another. That's a total of $75,000 over a 30 year period, or $2500 per year. I'd say that someone who has politics in his blood, is a sitting Senator and Chairman of the Banking Committee, and had the potential to attempt a run for the U.S. Presidency, would have a lot more easier ways of making $2500 a year. What happened, most likely, is that they just thought they were getting a competitive offer, and the only strike against them is that they chose Countrywide over other lenders who made the same offer.

Update 1 - June 18 2008 : Senators Dodd & Conrad answered questions from reporters on this matter at a press conference in Washington DC. Sen. Chris Dodd says he was told that they were part of a VIP program, but assumed it offered 'unspecified courtesies' and did not know that they were the beneficiaries of a special interest rate deduction or waiver. "The idea of asking for or seeking any kind of special preferential treatment is something I would reject immediately," Dodd said. "That would have ended the relationship" with Countrywide. Source links - Washington Post, Politico

Sen. Kend Conrad also said he didn't ask for a discount or know he received one at the time. But he does appear to be trying to make amends by donating $10,500 to Habitat for Humanity. Sen. Conrad also said that after discovering that Countrywide broke its own rules to approve his mortgage on an eight-unit apartment when they usually make loans on apartments with 4 units or less, he has decided to refinance with another lender. Source link - WSJ

If Sen. Dodd thinks he can just ignore this little storm, he's got another think coming. The Republicans will hammer on this issue, and it'll soon become a drag for the entire Democratic Party. To top it off, a Senate Ethics Committee investigation has already started. Now these investigations are typically toothless and more bark than bite, but they do tend to attract a fair amount of publicity. Best thing Chris Dodd can do now to help himself and his party is to donate the money, say he's sorry and quickly refinance elsewhere.