What Is Countrywide, Why Is It A Scandal And Why Should Buck McKeon Face Justice?

Yesterday, in a post about the injustice inherent in a lack of accountability for Florida Congressman David Rivera's crime spree, I decided to dip into some research I had already been doing for this post on Buck McKeon and his own lack of accountability for his own crime spree. The research was just some reading by Chris Hayes from his new book, Twilight of the Elites: America After Meritocracy and I decided that I would use it yesterday and, to be fair, include a little something about McKeon in the Rivera post. The two might wind up being cellies in a future episode of Lock-Up Raw anyway; they were both just named to CREW's latest list of Congress' 20 Most Corrupt Members. The passage from Hayes' book that I used-- there's much more below-- was about accountability in general:

Along with the other rising inequalities we've become so familiar with-- in income, in wealth, in access to politicians-- we confront now a fundamental inequality of accountability. We can have a just society whose guiding ethos is accountability and punishment, where both black kids dealing weed in Harlem and investment banksters peddling fraudulent securities on Wall Street are forced to pay for their crimes, or we can have a just society whose guiding ethos is forgiveness and second chances, one in which both Wall Street banks and foreclosed households are bailed out, in which both inside traders and street felons are allowed to rejoin polite society with the full privileges of citizenship intact. But we cannot have a just society that applies the principle of accountability to the powerless and the principles of forgiveness to the powerful. This is the America in which we currently reside."

CREW's report on McKeon is the barest tip of the iceberg-- basically only the airtight case that could be made against him in a court of law-- plus the nepotism he's guilty of that the House Ethics Committee is conveniently overlooking. (McKeon may be the worst but there are, after all, 82 members-- 40 Democrats and 42 Republicans-- who have paid family members through their congressional offices, campaign committees and PACs. The Ethics Committee looks the other way, which goes back to what Hayes was saying about two systems of accountability in our country, something that's gnawing away at the social fabric and the national cohesiveness.) Their report doesn't touch on a whole host of scandals that have come to define McKeon's rancid political career-- from consistent campaign finance cheating to the big one: his involvement with Sheldon Adelson's gambling empire in ways that jeopardize national security.

Before Fox News and Issa knew that an investigation would uncover that the only current Member of Congress caught up in the Countrywide mortgage web would be a senior Republican, Buck McKeon, they were gung-ho for an investigation. Once that investigation found that the only person still in Congress who could wind up behind bars was McKeon, Issa issued his damning report (on one of the slowest news days of the year, July 4th-- literally) and dropped the whole matter. This was when he was still gung-ho:

But I've found that people up in Santa Clarita, Simi Valley and the Antelope Valley who I talk to about the Countrywide scandal and McKeon's involvement can sense that something is wrong but have some trouble defining exactly what is wrong. That's why I turned to Hayes' book. Without mentioning McKeon at all, he gives a decent explanation of why Countrywide is important and why the culprits need to be brought to justice. Before we take a look at what Hayes had to say about the scandal though, let me just remind you of who Angelo Mozilo is. Aside from being a maxxed-out Romney donor, he served as CEO of Countrywide for 39 years (until 2008) and Condé Nast named him the #2 "Worst American CEO of All Time" while CNN named him one of the "Ten Most Wanted: Culprits" of the 2008 U.S. financial collapse. Mozilo's not in jail, nor has he even been tried. In 2010 he reached a settlement with the SEC over securities fraud and insider trading charges. Mozilo agreed to pay $67.5 million in fines of his net worth of $600 million-- $20 million of which Countrywide paid for him-- and accepted a lifetime ban from serving as an officer or director of any public company. The director of the SEC's Division of Enforcement, said "Mozilo's record penalty is the fitting outcome for a corporate executive who deliberately disregarded his duties to investors by concealing what he saw from inside the executive suite." But, by settling out of court, Mozilo avoided a trial and criminal prosecution. He was let off without having to acknowledge any wrongdoing and last year the Feds dropped its criminal investigation entirely.

Angelo Mozilo, the founder and CEO of Countrywide, was the subject of endless glowing profiles in the 1990s and early aughts as his company grew to become the largest mortgage lender in the country. As the housing bubble expanded, Countrywide maintained its competitive edge by pushing suicidally dangerous products like a mortgage that would-- get this-- allow borrowers to choose how much they would pay every month, adding the unpaid amount to their principal. Mozilo's [unearned, pr-manufactured] reputation for integrity and entrepreneurial verve allowed him to oversee what according to an SEC complaint was a large-scale fraud, while also arranging for himself some of the most blatantly corrupt CEO compensation packages in the history of American capitalism. In 2007, the same year the national housing slump eviscerated his company, Mozilo earned $121.5 million by exercising stock options and $22.1 million in additional compensation.

The role of fraud in creating the conditions for the housing bubble is now generally recognized, but the extent to which it was the driving force behind the bubble remains poorly understood and rarely acknowledged. ... While the people who ran the company continued to represent to shareholders in their public quarterly reports that the firm had maintained the integrity of its underwriting standards, internal correspondence shows that Mozilo himself was increasingly horrified by the degradation of the underwriting standards that had taken place inside the firm. When, in 2006, Countrywide began offering a mortgage that required zero dollars down, Mozilo wrote to a few of his most trusted subordinates that it was "the most dangerous product in existence and there can be nothing more toxic." A month later he was still distressed, noting that while the company's CFO called these loans the "milk of the business... I consider the product line to be the poison of ours."

And yet even after these missives, Countrywide continued to push this poison. At a certain point, Mozilo reconciled himself to the fact that Countrywide was now making most of its money from subprime loans, and given the trepidation expressed in his e-mails, it doesn't seem to be too much of a leap to view the massive executive compensation he was rewarding himself as his response to the impending blowup. Between 2001 and 2006, Mozilo managed to arrange for himself a staggering $470 million in total executive compensation. The most cynical interpretation of these actions, though also the most plausible, is that Mozilo was looting the company he'd built as fast as he could before the markets or regulators caught up to him.

...When cheating becomes an accepted norm within an institution, it produces a distinct and dangerous psychology in those who rise to the top. They come to view themselves as übermensches and begin to hold in contempt those not in on the secret. ... Convicted felon and former superlobbyist Jack Abramoff says he and his fellow influence peddlers would say of a politician that he "got the joke." to describe the moment when a politician understood the terms of the implied bribe being offered: fund-raising money for a specific legislative favor for his clients.

Buck McKeon "got the joke" long, long ago. And now the joke is on the people who live in Simi Valley and northeast L.A. County. A Countrywide investigator who foresaw the implosion of the housing bubble said, "There were more morons than crooks, but the crooks were higher up." And Chris Hayes adds that "Our system is supposed to reward the virtuous and punish the vicious, and yet everywhere you turn, it seems the vicious are living high off the hog."

Now let's keep all that in mind and re-read, if you read it yesterday, what Lee Rogers had to say about McKeon's involvement with the Countrywide Scandal, the same Buck McKeon whose entire career has been in opposition to regulations that would safeguard consumers from financial predators like Mozilo and who has consistently voted to let the bad guys run wild and leave ordinary working Americans at their mercy. Rogers:

Issa says in his press release that the ‘allegation that Buck’s vote was somehow bought by Countrywide is at odds with the facts and certainly not something I found in my investigation.’ While only McKeon will know whether his vote was actually bought or not, the proximity of his vote to his loan is extremely suspect. On October 5, 1998, McKeon called the Countrywide VIP desk and according to records he was ‘difficult to deal with’ and ‘edgy’ and wanted to close ‘ASAP.’ On October 6, 1998, McKeon voted to raise the FHA loan limits, something Issa’s report stated that the Mortgage Bankers Association lobbyist, who referred McKeon to the VIP program, wanted lawmakers to do. The very next day, on October 7, 1998, McKeon’s loan was approved. Countrywide CEO Angelo Mozilo personally intervened, instructing the loan officer to ‘take off one point, no garbage fees, approve the loan and make it a no doc.’ But it’s what Issa’s press release didn’t say that’s most telling. He didn’t deny that Buck McKeon received a favorable rate on his loan. He didn’t deny that Buck McKeon knew he received special treatment. He didn’t deny that Buck McKeon received a gift worth thousands of dollars which is not only banned under House rules, but also by law. It’s really sad that Darrell Issa has spent all this time and taxpayer money uncovering the corruption that led to the mortgage meltdown, but he hasn’t acted to bring anyone to justice or even to enact the recommendations in his own report to prevent this from happening again. But as far as Buck McKeon’s involvement is concerned, voters can read the report for themselves and make their own determinations.”

It's virtually impossible to read the report with an open mind and not conclude that McKeon is guilty of at least accepting-- if not soliciting-- a bribe from Mozilo. Every other congressman who did was either defeated in his reelection bid or forced to retire. Buck McKeon is the last Countrywide crook left-- the last fox charged with guarding the henhouse who was stealing the eggs. It will be up to voters in his district, CA-25, to determine if its time to tell him the jig is up. Buck McKeon helped set the rules that led to the economic collapse of millions of American families and he did it to benefit himself and his crooked family. So far there has been absolutely no accountability whatsoever. Right now he's busy using his connections, as Chair of the House Armed Services Committee, to help raise cash for Romney and for other congressional Republicans who oppose rules and regulations for banksters and other financial predators and parasites. As we head into the final weeks of the 2012 election cycle, Blue America is doing what the DCCC refuses to do: targeting high-ranking Republicans-- rather than powerless backbenchers-- who have been complicit in gaming the system against the ordinary working families of America and on behalf of themselves and their corporate paymasters. Buck McKeon and Paul Ryan are on the very top of our list. If you'd like to help clean this mess up, you can contribute directly to our reform candidates here or to our Independent Expenditure PAC here.