Senate Ethics Committee Clears Dodd and Conrad, With an Admonition

Tuesday, August 11, 2009

IT'S BEEN A LITTLE more than a year since the news broke that Sens. Kent Conrad (D-N.D.) and Christopher J. Dodd (D-Conn.) had received loans through a VIP program of the now-defunct mortgage firm Countrywide Financial. The program, known within the company as "Friends of Angelo" in honor of chief executive Angelo Mozilo, reportedly served multiple prominent people in government and business. Given that Countrywide's subprime lending practices were widely blamed for the broader housing market meltdown, the story raised questions as to whether Mr. Mozilo had used his connections to shield his company from timely scrutiny. While the jury may still be out on that, it's worth noting that the Senate Select Committee on Ethics has found "no substantial credible evidence" that Mr. Dodd or Mr. Conrad broke the applicable Senate rules -- which forbid senators from accepting loans not "generally available to the public."

In 2002, Mr. Conrad spoke to Mr. Mozilo in a short call facilitated by mutual friend James A. Johnson, the former chief executive of mortgage giant Fannie Mae. Soon he had a $1.07 million loan -- which he later refinanced, at a discount of $10,500 in fees personally ordered for him by Mr. Mozilo. A few weeks later, Mr. Conrad was back in touch with Countrywide, this time for a $96,000 loan secured by his eight-unit apartment building in Bismarck, N.D. -- not usually the type of property Countrywide financed. The ethics committee found that the terms of the first loan, including the discounted fees, were nice but similar to those offered to others of his financial status, and that no one told Mr. Conrad about the discounts (which he later donated to charity). The $96,000 apartment loan was "not unprecedented" since Countrywide could sell it on the secondary market. The committee reached similar conclusions with regard to two home loans that Mr. Dodd and his wife got worth a total of more than $750,000: Being a Friend of Angelo meant faster, friendlier service and some discounts, but nothing that similar clients couldn't have gotten.

The ethics committee letter goes a long way toward validating both men's versions of events. But it's not a perfectly clean bill of health. The committee chided them for their striking lack of curiosity about what it meant to be part of Countrywide's VIP program, once they were told they were in it. Their lack of vigilance, the committee noted, contributed to the "appearance of impropriety," which both senators have been battling ever since. Sens. Barbara Boxer (D-Calif.) and Johnny Isakson (R-Ga.), the ethics committee co-chairs, have proposed legislation that would force members of Congress to disclose information about their home mortgages, including their loan date, amount, interest rate and issuer. This is one barn door that's worth closing, even now.


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