CNBC's Larry Kudlow and Other Liars Touting the Countrywide VIP Loan "Scandal"

There was nothing subtle about Larry Kudlow's lies. No one at CNBC who paid attention to Kudlow's rant could doubt that he intended to deceive the network's viewers. But CNBC management seemed unconcerned. Kudlow's lies were artful, like magic tricks that fool an audience into believing it heard something different from what was actually said.

"Dodd claimed there was no discussions between himself and senior people at Countrywide. This whistleblower said that is exactly wrong," proclaimed Kudlow, referring to Robert Feinberg, a former low-level Countrywide loan processor who had appeared on Squawkbox earlier that morning. Feinberg had never said anything remotely like Kudlow's invented accusation. Kudlow repeated the same lie a few seconds later. "Countrywide was on the phone several times with him and his wife! All that contradicts Senator Dodd, doesn't it?" said Kudlow. The trick was to fool viewers into thinking that Dodd's phone conversation with a junior loan processor - Dodd said he had only spoken with "loan officers" - was the same thing as speaking with a senior executive at Countrywide. These are the tricks that liars like Kudlow use to defame their enemies.

Eight months later, Kudlow said Dodd "has yet to divulge fully his sweetheart mortgage deals with the former Countrywide." Once again, the accusation was a bald-faced lie, a fraud on CNBC's viewers. In fact, the terms of his loans had first been disclosed in Portfolio long ago. In addition, Dodd had disclosed all supporting data needed to discern whether the deals were arms'-length.

Kudlow's cohorts in print the media performed similar tricks, though they were careful to avoid any obvious lies. Still, they dissembled with great ferocity. The scandal about the Countrywide VIP loan program has almost nothing to do with Democratic politicians, and everything to do with the corruption of respectable media outlets by Republican shills.

The facts have always been hiding in plain sight, buried within the text of Portfolio's cover story on the Countrywide program. There never existed any evidence that Dodd got a sweetheart deal from Countrywide. Zero, nada, bupkis. The truth was obscured by Portfolio's deceitful claim, soon transformed into urban legend, that Dodd saved $75,000 on his Countrywide mortgages. When Dodd disclosed the facts, the Republican shills doubled down on their lies.

Here's why the evidence never existed.

There's only one standard for discerning whether Dodd got a "sweetheart deal" on a mortgage loan. It's the comparable transactions standard. Did the Dodd get better terms than he would have gotten from any number of different lenders on the open market? If he didn't, then there was no sweetheart deal. Period.

If Dodd got market-based terms, then it doesn't matter what a Countrywide loan processor said over the phone, or what terms were offered to other Countrywide customers, or what internal e-mails suggested about Dodd's file. So far as Dodd or any other customer is concerned, those issues are irrelevant, because all money is green. This is basic economics, something beyond the ken of Larry Kudlow. This is also a critical distinction that many in the press have worked mightily to obscure.

The comparable transactions standard was invoked by The Wall Street Journal in June, the first time the Countywide VIP story was used to impugn Democrats. But unlike Portfolio, the Journal reporters never received copies of loan documents, so their analysis was stillborn. The best they could come up with was a hypothetical comparison suggesting that the loans kind of maybe, kinda, might possibly be better than what was available on the open market. Deep within the story came the operative disclaimer:

"A comparison of the Fannie Mae officers' terms with interest rates prevailing when they got their loans raises the possibility Countrywide gave them preferential terms. But it's impossible to tell for sure from public documents. An array of other factors also can account for lower-than-average rates, including a borrower's income, total assets and credit score; how big the loan is compared with the home's value; and how many 'points' a borrower may have paid upfront in order to get a lower rate."

"Translation for those who lack any financial sophistication:" I wrote at the time, "They don't know jack." The Journal literally had nothing substantive to form the basis of a story. And yet some not-so-careful journalists were ready to jump onto the phony scandal narrative bandwagon. As I noted:

"So to recap, here's how the right wing media campaign works:

Step 1: Plant a story based on speculation rather than hard evidence._
Step 2: Rely on sloppy journalists to present the speculation as fact._
Step 3: Use the 'factual' premise to argue that Democrats are just as ethically compromised as Republicans."

After a week of touting the substance-free story, the Journal unearthed another little nugget. Countrywide CEO Angelo Mozilo took a personal interest the VIPs' loans. That's kind of weird but it doesn't, by itself, demonstrate that any of the borrowers had any reason to suspect that anything inappropriate or unethical was going on.

Portfolio took up where the Journal left off, though there were subtle shifts in the narrative. The VIP program that the Journal touted as available to "a few customers" turned out to be something available to thousands.

Robert Feinberg had presented Portfolio with stolen copies of confidential credit documents of various prominent Democrats. So Portfolio could do what the Journal could not. It could actually compare the terms of the VIPs' loans with those available in the open marketplace. But to do so that would have highlighted the fatal flaw in the narrative's premise.

The purported "deals" that Dodd and the others VIPs received were waivers of "junk" or "garbage" fees, and/or "free" float-downs. But as any real estate agent can tell you, a well-qualified borrower can get those benefits anywhere. Junk fees are paid by suckers. And the reason why lenders offer free float-downs is because when the market rate, at the time of closing, is lower than the locked-in rate, a borrower is free to walk away and take his business somewhere else.

Based on Feinberg's claims, Portfolio promoted a lie that soon became an urban legend - that Chris Dodd saved $75,000 on his mortgages with Countywide. [The actual words seem to be missing from the current online version of the Portfolio article, but, as NPR reported, "Portfolio calculated that lower rates and waived fees would save Dodd $75,000 over the life of the loans."] The lie was obvious and transparent, because Portfolio calculated Dodd's savings on his interest rate extended over 30 years, even though his interest rate was fixed for only five years on his Washington home and only ten years on his Connecticut home. This issue was covered in detail by me previously in HuffPost. It's possible that this mistake fell through the cracks in Portfolio's editing process, but at this point the magazine has no excuse for its failure to issue a public retraction and apology to Dodd.

Portfolio claimed that Dodd had received free float-downs on his mortgages, even though it had no documentation to back up the claim. It was based entirely on the recollection of Robert Feinberg, a source with major credibility problems.

Feinberg tended to amplify his allegations over time. Nowhere in the Portfolio article is there any suggestion that any of the VIPs got a discount on their interest rates, although the casual reader might confuse a float-down with a discount. Months later, Feinberg told NBC's Lisa Myers, "They got a discount on the interest rate."

"Did these VIPs know that they were getting special deals?" asked Myers. "Absolutely," said Feinberg. Of course, "special deal" is one of those phrases, like "natural ingredients," which can mean anything. As for Feinberg's assertions about what his customers actually "knew" or "believed," here was the critical exchange on with Michelle Caruso-Cabrera on CNBC:

CARUSO-CABRERA: Tell me about your conversations with Senator Dodd and exactly how this went down and how he got a cheaper loan than most people could get.

FEINBERG: My conversations with Senator Dodd were maybe once or twice. It wasn't long conversations because he is a very busy person, but basically he came through a receptionist for one of the managers and I was given what to do with him as for discounts. I mostly spoke with his wife. So most of the work was done with his wife via e-mail or phone calls.

CARUSO-CABRERA: Can you definitely say that they knew they were getting better terms than they would have gotten otherwise?

FEINBERG: Absolutely.

CARUSO-CABRERA: No doubt in your mind?

FEINBERG: No doubt in my mind. When anyone entered on a phone call into the V.I.P. unit it wasn't just your job to provide them with discounts. It was your job to get the loan so you did explain where they were and how they were being treated and also that there was a lot of taglines that we used that the pricing was specially priced by [CEO] Angelo [Mozilo] and you're getting a better rate than a regular customer would get.

Words on the page do not do justice to the video:

Maybe Feinberg thinks his customers never spoke to a telemarketer. Or never heard a car salesman say, "I spoke with my manager and we'll make an exception and waive the dealer prep fees just for you." On the other end of the phone, Feinberg's tagline - "Because you're in the VIP unit, we'll be waiving the junk fees..." - sounds impressive if you were born yesterday. Most people would take it with a pound of salt. And how is it that sharing a few phone calls suddenly gave Feinberg absolute certainty as to what Dodd believed? Just because someone does business with you, doesn't mean he believes everything you say.

But Feinberg sounded like Paul Volcker compared to The Hartford Courant's Kevin Rennie when he appeared on the The Wall Street Journal Editorial Report on Fox News. Rennie has been the Republicans' local pit bull on the story since June. This guy is not only a liar, but a stupid liar.

Rennie was asked by Paul Gigot about the report offered by Dodd, which compared the terms of his mortgages with those available elsewhere on the open market:

RENNIE: It isn't very persuasive when you read it. In fact, it's very selective in the comparisons that it makes. It also assumes that every borrower, every good deal that was available would be condensed into a deal for each borrower. So only Christopher Dodd and his wife got that kind of deal. They got every advantage. Most borrowers would get one or two advantages, but not all of them. That's the difference.

GIGOT: Portfolio magazine estimated, when this first started, that he and his wife would have saved $70,000 on two mortgages over the life of the loan. When you look at the specific benefits he may have received, were they lower interest rates, points off that he wouldn't have had to pay or what?

RENNIE: A lower interest rate. Even the report really inadvertently shows that. No reduction in fees. And in addition, he got the float down, which is, from the time he locked in his mortgage to the time he had the mortgage closing, the interest rate was reduced for free.

In addition to the "lower interest rate" he got a float-down for free, says Rennie, who doubled down on his lies.

Guess what, The Hartford Courant revealed a document that removed all doubt that Feinberg and Rennie are liars.

Last July, Portfolio reported, "When [Dodd] applied, Countrywide waived three-eighths of a point, or about $2,000, on the first loan, and one-fourth of a point, or about $700, on the second." Yesterday, The Hartford Courant repackaged that sentence in 900 words, hoping to deceive its readers into thinking some big and important news suddenly came to light. Here's the histrionic lead:

"An executive at mortgage giant Countrywide Financial overrode the company's loan-writing policies to give a discount to Sen. Christopher Dodd, the powerful chairman of the Senate banking committee, according to an internal Countrywide document turned over to congressional investigators and obtained by The Courant."

The Courant dissembled to the point of fraud by using the phrase "overrode the company's loan-writing policies." A waiver of $2,700 in fees on two mortgages totaling $775,000 for properties appraised at $1.3 million is simply nickel and dime stuff, within the scope of what is regularly negotiated between customers and lenders. Any banker knows that exceptions to pricing guidelines are made every day of the week in the normal course of business, for legitimate business purposes. The Courant did back-flips to make something ordinary sound like something corrupt, and it did so by working hand in glove with Darrell Issa and other Republican shills who are working furiously to malign Dodd and other Democrats.

But the document touted by The Courant removed all doubt of Feinberg's deceitful intent. Remember, Feinberg's recollection of this free float-down was the basis for Dodd's fictional $75,000 savings. And Rennie said Dodd got a free float-down and a reduced interest rate.

The denouement requires a brief explanation of some mortgage products. When you apply for a mortgage you have the option of locking in the applicable interest rate at the date of closing. This is called a rate lock. You also have the option of obtaining an additional feature, which is to close with the lower of the locked-in rate or the current market rate at the time of closing. This is called a float-down. (Many banks offer this feature for free, or embedded in the locked-in rate.) You would never get a float-down unless you got a rate lock. The attached document shows that Dodd never got a rate lock, ergo Dodd never got a float-down. Market rates fell between April 2003, when Dodd applied for his loans, and June 2003, when he closed on them.

There never was any discount or any float-down. Feinberg invented the float-down so he could fabricate the $75,000 story. And Rennie, who lied about the contents of Dodd's report, piggybacked on top of Feinberg's lies and added a new lie - an interest discount - because of his general contempt for the truth.

Dodd's critics have asked why he did not hand over all of his loan documents to reporters last June, when Portfolio first made the phony accusation that he saved $75,000. The reason is pretty obvious. The press is not acting in good faith.

There is much more to be told about the Countrywide VIP smear campaign, most notably the fraudulent representations in documents issued by Darrel Issa, but for the moment here's an interim to-do list:

1. CNBC's viewers should insist that the network retract Kudlow's lies, specifically: "Dodd claimed there was no discussions between himself and senior people at Countrywide. This whistleblower said that is exactly wrong." and Dodd "has yet to divulge fully his sweetheart mortgage deals with the former Countrywide."

2. Portfolio's readers should insist that it retract its claim, apparently removed from its online versions of the article, that there was any legitimate basis for calculating a $75,000 savings on Dodd's mortgages.

Comments

[Ohioan730]

Dodd didn't get a "sweatheart deal", what he got was a regular home loan. The telling part is that Countrywide is such an egregious predatory lender, that anyone who got a "fair" loan seems by comparison, to have gotten a "deal". The reason they couldn't pad the loan with fees like they do everyone else, is because of Dodd's public stature. They knew if they loaded him with junk fees, he would squeal to the media about it and people would LISTEN.

Years ago, when I was working as a community organizer and attempting to make a connection between the increasing presence of predatory lenders (Countrywide) and the 500% increase in home foreclosures in NE Ohio, I was visited in my office by a woman who's elderly mother had been targeted and "taken" by Countrywide. Her mother had been cited by the city for not having her house painted, steered toward shoddy contractors that never finished the job, and when she got the loan documents, she had been padded with so many fees, that she owed back DOUBLE her mortgage, to the tune of $250,000!!!!

Countrywide has been getting away with this for years. The fact that they didn't do it to Dodd, tells me that they only save their really egregious predatory lending for peons like us--and our elderly parents who don't know any better.

[Ohioan730]

I think its important to point out that the elderly woman I mentioned in my above post, OWNED her home free and clear. Her mortgage had been paid off for decades. One encounter with a city councilman, shoddy contractors and Countrywide caused her to lose everything she had worked for her entire life.

Predatory lending did more than just give people loans they didn't deserve, in some cases, rings of corruption that involved city officials were discovered. I hope some of that sees the light of day. Man, do I have some stories to tell. People would be REALLY angry right now at Countrywide and not even thinking about Dodd if they had seen even HALF of what I've seen while trying to uncover this cesspool of a situation.

[furr]

Can you really believe Kudlow, a drug addict who has a career arc in the private sector that begins with being the chief economist for Bear Stearns and ends with being bearly employed keeping a job as teleprompter news reader on CNBC, because he espouses a right wing opinion that is popular among CNBC's audience?

[InLosAngeles]

Kudlow did blow. Obama did blow. Both admitted it. Get off your high horse. Come to an LA political fundraiser at a private home and you'll see many of your stars and politicians engaging in behaviour you would have thought they would have abandoned decades ago. Dodd is a skunk in our party. But he's our skunk. The story is now breaking that Dodd's wife was an outside director for an AIG controlled company domiciled offshore. Dodd received the most of any politician from AIG in political contributions. Why must all of you who are cutting on Kudlow for being a flawed character always pretend that the same nonsense isn't going on in the same amounts on our side. Give me a break. All of these distractions take away from Obama having a decent shot at getting us back on track. Let them get their feathers ruffled and yap like little lap dogs. We have the oval office and congress. Let's use it wisely so it lasts more than one term.

[JayDDrew]

Experimenting with drugs as a college student and ruining your professional career with a cocaine habit are worlds apart.
Regardless of what Dodd has done (and where there's smoke, there may be fire), Kudlow has zippo credibility. The point of the article is Kudlow told (yet another) blatant lie.
Hard to believe Kudlow and Jim Cramer had a show together on CNBC. Think it may have been the inspiration for Al Franken's book "Liars.."

[Robert Cantor]

Everyone, everywhere is guilty of something? Except me and you, of course.

[ron071]

The "stars" of CNBC like Kudlow, Cramer, Santelli, Bartiromo, etc. tell us all we need to know about CNBC. It's only value to viewers and investors comes from the running data strips which are not under their control. To believe otherwise is either stupidity or plain ignorance of the Madoff " investor" types.

[Robert Cantor]

Spot on! CNBC has been completely discredited as an insightful information source. They are just talking heads to fill up air time as the ticker goes by.

[dadw5boys]

DODD WAS HOLDING COUNTRY WIDE ACCOUNTABLE BEFORE THEY REPORTED HE GOT A LON FROM THEM.

The loan records were released a long time ago and you can view them on the web site for disclosures.

[Pablo175]

"Dodd's critics have asked why he did not hand over all of his loan documents to reporters last June, when Portfolio first made the phony accusation that he saved $75,000. The reason is pretty obvious. The press is not acting in good faith."

What????

[Pablo175]

Why won't Dodd release the documents? What is he hiding?

What about Sweetheart real estate deal in Ireland?

[dadw5boys]

he did they were released a long time ago ~~~~~~

[blico]

link please.

[doublewhammy]

Just a few years back, a neighbor had Aids, and a countrywide loan and no this is not a country and western song. Not a toxic asset, and they knew it. Charged him 12 % interest, considered bad debt loan. The neighbor bought the house so that he could live in it and not die in a hospital and homeless. Countrywide was foreclosing the same day. I told them then that one day they would go down for their horrific practices. Countrywide is a horrible lender and horrible practices. Are they on Geithner call list to get us out of this mess, probably. Believe nothing that they say.

[blico]

1. CNBC's viewers should insist that the network retract Kudlow's lies, specifically: "Dodd claimed there was no discussions between himself and senior people at Countrywide. This whistleblower said that is exactly wrong." and Dodd "has yet to divulge fully his sweetheart mortgage deals with the former Countrywide."
Absurd! - Typical of the left. "We don't like what you are saying, so we are going to try to keep you from speaking".Sen. Dodd - show us your mortage contract! While you are at it - how about a "statement of net worth" from the day you were elected.

[musicman42]

No, we don't want to keep you from speaking. We would just like for you to present facts and stop with the "got ya" crap like this faux story about Dodd.
98% of this kind of sh*t story comes from the lack of real journalism. Investigative reporting that takes time, money and lots of effort. It of course doesn't help when you have "news" stations that are really just glorified gossip columns.

[martiniandabotoxchaser]

You obviously don't read The Hartford Courant. The journalist who is responsible for this investigation, Kevin Rennie, has an impeccable reputation and a long track record of being thorough, fair and unbiased. His investigative work led to the resignation of former Connecticut Gov. John Rowland. Please don't condemn all journalists. Mr. Rennie is a true professional.

[blico]

See below!.

[leftcoastindy]

Yea, don't you just hate it that 'the left' only wants to believe the truth?

Maybe you could read the article. If there is no proof Dodd got a sweetheart deal, he doesn't

need to show anyone anything.

[blico]

The left only wants to believe the truth when it suits their interests. The seriousness of the allegation demands response.

[Meg401]

THIS is quality journalism!

[WorldGriot]

who is larry kudlow really? I know about his fiasco on CNBC and his NRO role but who is he really?

[kozy]

Kudlow, in my opinion, is wrong on so many things I wouldn't know where to begin. He is just a right wing messenger for the U.S. aristocracy. Dodd. however, like so many Democrats and Republicans, is wedded to lobbyists. Many of the lobbyists are influence peddlers for the same right wing aristocracy (or in some cases a left wing aristocracy). The public is supposed to believe that there is a great conflict between Democrats and Republicans. But, there isn't. They both are servants of the aristocracy. In the end you have to figure out things for yourself. Why has China's and Germany's auto industry picked up recently? Because the government is offering incentives to buy cars -- TO ACTUAL PEOPLE! OMG, People and not Big Wigs? Its just simple logic. In the U.S the "theory" to get the economy moving is give banks billions of dollars -- this will create TRICKLE DOWN goodies to the masses! (Intermissionn while I recover from laughter). The U.S. public has been had and doesn't even know it.

[dezzertguy]

This is the Dodd side of the story. Common sense tells one that Countrywide would not have given preferred loans to VIP without expecting some consideration later. It could be more business or other services the borrower could supply. Dodd had offered to donated the savings he received to charity. Why would he do that if he did not save money? His meeting with reporters was tightly controlled, late and they were not allowed to copy documents or do much. The citizens of CT have started to learn about Dodd and hopefully he will be turned out next year.

[hippie chucker]

No, no,no...other that Fiderer saying that it's "weird" that Dodd somehow magically was ushered into the Friends of Angelo VIP list, he never tackles the WHY of it.

Why would an ostensibly smart lawyer, who oversees the mortgage banking industry, be dumb enough to even talk about discount loans to an insider at a mortgage company-if he really had no financial edge to achieve?
It never occurred to him, with all his years in Congress, that it MIGHT LOOK A TAD BIT ODD?

How the hell did the VIP loan manager find out Dodd was getting a mortgage in the first place?

[leftcoastindy]

How the hell did the VIP loan manager find out Dodd was getting a mortgage in the first place?"

Uhh, his wife called to find out if the loan was going through?

[AllenD]

Kudlow is a waste of skin. I still remember his prediction on the eve of the Iraq invasion that within 6 months, Iraq would be pumping 10 million barrels of oil per day and that the price of oil will be $10/barrel. I also heard him advocate going to war with countries like Syria and Venezuela because it would be good for the stock market. A couple weeks ago, Kudlow was crying about how unfair Obama was in going after offshore tax havens for the rich.

[wwwFIXNEWSNOWorg]

As long as we don't have a News Quality Rating System standard that allows news content to be labeled like almost all other consumer products, this type of information will continue to be passed off as journalism.

If we had a News Quality Rating System these programs would score very poorly against ethical journalism metrics

http://FixNewsNow.org ( aka http://CeaseSPIN.org )

[ron071]

Yes, indeed! A News Quality Rating System is precisely what is needed to identify the frauds like Kudlow, Cramer and the CNBC Cheerleaders of Wall Street. This would force these faux news outlets to really clean up their acts.

[olephart]

I’ve always viewed Larry Kudlow as the perfect inverse barometer. All of his policy preferences are diametrically opposed to proven policy initiatives and aligned with those that have previously failed. His methodology for saving a sinking ship is to drill another hole in the bottom to let the water out. That he has a platform from which to speak is in and of itself testament to his network’s ambivalence toward reality and truth. He and all of his allies have consistently been clueless as to the economic realty that has engulfed us. The inept that look to Kudlow for guidance are incapable of distinguishing fact from fiction thus his rants only effect the affected.

[Bettysdad]

Business journalism is to journalism what military music is to music.

The business press are nothing but cheerleaders, who have never seen a pile of money they questioned.