Conservatives have long opposed the housing bill as a bailout for “irresponsible” lenders and borrowers.
But the news that two Democratic senators got special mortgage deals through a VIP program at Countrywide Financial has given Republicans additional ammunition: the trappings of an ethics scandal to use to try to tarnish the housing legislation and the Democrats who wrote it.
Some Republicans now say the American people won’t be able to “trust” the housing legislation or their Congress until investigations are held. They imply that Democrats are trying to rush a bill before anyone can see what’s really in it. They’re calling Democrats hypocrites for not holding hearings on the VIP loan program after disparaging Republicans over Enron and other scandals.
Democrats and some lobbyists representing mortgage lenders say GOP leaders are just trying to make some political hay off the VIP loan story — even if it means going after an industry they usually support.
“It’s too good to pass up,” one Republican lobbyist said of the fact that Senate Banking, Housing and Urban Affairs Committee Chairman Chris Dodd (D-Conn.) — who is currently managing the housing bill on the Senate floor — received a special loan deal from Countrywide.
“The Republicans are highlighting the controversy surrounding Dodd’s loan as the Democrats did with Republican mistakes,” said another K Street Republican.
On Wednesday, House Minority Leader John A. Boehner (R-Ohio) blasted both House Financial Services Committee Chairman Barney Frank (D-Mass.) and Democratic Caucus Chairman Rahm Emanuel (Ill.) for not convening investigations into Countrywide’s special loans.
Other Republicans have suggested that preferential treatment from mortgage lenders could have improperly influenced the housing bill.
“Key Democrats received possibly illegal loans. Now they are willing to give lenders their own sweetheart deal on the backs of American taxpayers,” said Rep. Tom Price (R-Ga.). “It’s a stunning demonstration of disrespect for the millions of responsible American taxpayers who didn’t get involved in a shaky loan.”
A June 19 letter to Pelosi from 28 House Republicans made the same connection, demanding an investigation into lawmakers’ mortgages to determine “the extent to which this scandal might have affected public policy.” The letter’s signatories included some high-ranking caucus members, including Boehner, Republican Study Committee Chairman Jeb Hensarling of Texas, Minority Whip Roy Blunt of Missouri and Republican Conference Chairman Adam Putnam of Florida.
Nine Senate conservatives wanted the housing bill slowed until it could be determined how much Countrywide stood to gain from the legislation.
Boehner’s office has seized upon reports that banks, including Bank of America, helped craft the housing legislation and stand to gain billions of dollars should it become law. Since the “sweetheart loan” scandal broke, Boehner’s press operation has sent reporters media accounts that detail banks’ role in writing the legislation and suggest that lenders influenced Democratic sponsors with campaign contributions.
A Washington Examiner column, for instance, quoted House and Senate staffers who oppose the bill as saying that Bank of America wrote the legislation and got exactly what it wanted. In the same story, a House GOP aide called the housing legislation the “Bank of America bill on steroids.”
Emanuel called Boehner’s attack on him an attempt “to distract from his vote against a plan to help struggling homeowners.” Emanuel noted that Boehner’s home state of Ohio “has been hit particularly by the housing crisis” and said that Boehner should “join Democrats in support of meaningful legislation to address this risis.”
“I think they’re desperate” was Frank’s assessment of Republicans’ aspersions.
The housing legislation — which remained stalled in the Senate at press time Wednesday — has gone through several iterations, with significant input along the way from Federal Reserve Chairman Ben Bernanke and Federal Deposit Insurance Corp. Chairman Sheila C. Bair, Frank said.
When policymakers determined they needed a way to reduce the principal on mortgages, they approached lenders for suggestions. Credit Suisse was the first to offer a proposal along the lines of what’s in the bill now: enabling distressed homeowners to refinance into affordable, government-insured mortgages, Frank said.
Seeking ideas, lawmakers involved in writing the legislation talked to a wide range of people and organizations, banks as well as housing advocates, Frank said. “Why is that bad?”
Lobbyists involved in the legislation say there’s nothing unusual about seeking policy expertise from experts on an issue — as Bank of America and Credit Suisse are on the mortgage front.
“Can [Republicans] cite a single instance when they stood up to banks?” said Rep. Brad Miller (D-N.C.), who worked hard for housing legislation opposed by the lending industry. “It’s absurd.”
That bill, which would have allowed bankruptcy judges to reduce mortgage balances to help homeowners keep their houses, stalled after the mortgage lending industry waged an intense lobbying war against it.
Frank supported the bankruptcy measure, as well, but kept it out of the final housing bill because it didn’t have the votes to pass.
“This is not his dream package, either,” Miller said of Frank. “This [bill] has all that’s possible, because the lenders can count on all but two Republican votes” to keep whatever they want out of the legislation.
Boehner spokesman Michael Steel said that Republicans are not trying to score political points. “We have to get answers about where this legislation came from” and who it benefits, he said. “We want the most appropriate response to the problems in the housing market that we can get.”
Conservative groups are thrilled to see Republicans taking shots at the housing bill.
On June 18, a coalition of taxpayer groups — including the American Conservative Union, the National Taxpayer Union and Club for Growth — sent a letter to all members urging them to vote against the bill because it puts taxpayers on the hook for the mistakes of imprudent lenders and borrowers.
Another group that signed on to the letter, former House Majority Leader Dick Armey’s FreedomWorks, dubbed the bill the “Dodd-Countrywide Mortgage Bailout Bill.”
“We just want to stop the bill,” said Max Pappas, FreedomWorks’ vice president for public policy. If the ethics allegations slow down the bill’s progress — as Republicans hope they will — “more congressmen will have a chance to learn about the bill, and I think more of them would vote against it when they see what’s included.”