There's definitive, ironclad proof that Senator Dodd's accuser has been lying from the start. The entire Countrywide VIP loan scandal is predicated on the flimsy recollections of this liar, named Robert Feinberg. Luckily for Feinberg and some Republican hit men, some less-than-professional reporters like Larry Margasak of the Associated Press are more than willing to embellish Feinberg's story.
More than a year ago, Feinberg, a loan processor laid off from Countrywide Financial, stole some confidential loan documents on mortgages extended to 17 Democrats, and persuaded Conde Nast Portfolio that he had evidence of a big scandal. His documents never demonstrated much of anything. The "sweetheart deals" or "VIP treatment" were mostly nickel and dime stuff, waivers of "garbage fees" that are only paid by suckers. Nothing in the paperwork suggested that anyone was paying a below-market interest rate on his loan.
So, in order to inflate the dollar benefit of the "sweetheart deals," Feinberg made up some facts. He offered no written backup, but Portfolio, desperate to uncover a "scandal," took his word for it. In fact, there was written documentation disproving Feinberg's lie. But since Feinberg concealed that information, Portfolio was able to maintain plausible deniability.
"Portfolio calculated that lower rates and waived fees would save Dodd more than $75,000 over the life of the loans," reported NPR and dozens of other media outlets. About $2,700 of those savings were traceable to written documents, and Feinberg made up the remaining $72,000.
Feinberg lied by claiming that Dodd received free "float-downs" when he refinanced the mortgage loans on his homes in Connecticut and Washington. The free float-downs purportedly reduced the interest rate on one $275,000 loan from 4.875 percent to 4.5 percent, and reduced the rate on another $506,000 loan from 4.875 percent to 4.25 percent. (For an analysis of why the calculation of a $75,000 savings was fraudulent, go here.)
But there never was any float-down. The truth is far more banal and obvious. When Dodd applied to refinance his mortgages in April 2003, the market rate was 4.875 percent. At the time of his application, Dodd did not lock in his rate. Instead, he assumed the risk that rates might rise above 4.875 percent or that they might decline further. When Dodd closed on his mortgages several months later, market rates had fallen, and he got the lower spot rates, which were same rates extended to any comparable borrower at the time.
We now know the truth based on documents that Feinberg concealed from Portfolio but handed over to Rep. Darrel Issa, who is unilaterally attempting an end-run around the Senate Ethics Committee investigation into the matter. The documents for Dodd's mortgage application show "Not Applicable" on the line for a rate-lock, a product which would have allowed Dodd to lock in his rates at the time of his application in April 2003, before his closings in June and July 2003.
Since Dodd never had a rate lock, he never had the famous float-downs that, according to Feinberg and Portfolio, saved Dodd $72,000. A float-down is a promise that you are entitled to the lower of your locked-in rate or the spot rate at the time of closing. If you don't have a rate lock, you don't have a float-down. Of course, Washington media types are not especially interested in things like details.
Imagine for a moment that you have left the Gossip Girl world of Washington media, and lived in a world where reporters acted professionally and ethically. A reporter covering the Countrywide VIP loan story would ask the following questions:
Did Dodd actually benefit from a sweetheart deal? That is, did he receive terms better than those available to anyone else on the open market? And if Dodd did receive better terms, was the discount so glaringly obvious that anyone would have been suspicious? The clear-cut answer to all of those questions is, "No." A reporter who showed some interest in fact checking would have read and evaluated the substance of Dodd's written response on the matter. Or he might have called a real estate professional and asked, "Suppose a customer gets a $2,700 reduction in upfront fees on mortgage refinancings totaling $781,000, would he have reason to suspect that the reduction was something out of the ordinary?"
Instead, Washington media types say that Dodd disputes the allegations, but go no further into the substance of the data that validates Dodd's version of events.
What did Dodd hear or see that made him think that he got a better deal than someone else? The answer to that question is that a low-level paper pusher, Feinberg, repeated some standard marketing tag lines on the phone. Check out Feinberg's appearance on CNBC.
Here's how the AP's Larry Margasak selectively reported the facts so as to leave his readers with a several false impressions.
Despite their denials, influential Democratic Sens. Kent Conrad and Chris Dodd were told from the start they were getting VIP mortgage discounts from one of the nation's largest lenders, the official who handled their loans has told Congress in secret testimony.
Both senators have said that at the time the mortgages were being written they didn't know they were getting unique deals from Countrywide Financial Corp.
In fact, the deals were never "unique." They VIP loan program was extended to thousands of individuals and Countrywide employees. And Feinberg's secret testimony was not to Congress, but to staffers working for Rep. Darrel Issa, R-CA. No House committee has authorized Issa's freelance investigation, which is designed to fabricate a media narrative that undercuts the investigative efforts of the Senate Ethics Committee. Margasa k didn't think it was strange that a member of the House would exceed his institutional authority by investigating members of the Senate.
Robert Feinberg, who worked in Countrywide's VIP section, told congressional investigators last month that the two senators were made aware that "who you know is basically how you're coming in here."
In fact, Portfolio reported that Dodd received no VIP treatment on his first Countrywide mortgage, secured in 2002. So Dodd had no reason to suspect that he would receive anything different when he refinanced with the same lender. Margasak never mentioned that these alleged conversations were phone calls placed by Feinberg from his cubicle at Countrywide's loan processing center, 3,000 miles away from Washington.
Asked by a House Oversight investigator [actually an investigator working for Issa without the authorization of any Committee chairman, and without the involvement of any Democratic staffers or House members] if Conrad, the North Dakota senator, "was aware that he was getting preferential treatment?" Feinberg answered: "Yes, he was aware."
Referring to Dodd, the investigator asked:
"And do you know if during the course of your communications" with the senator or his wife "that you ever had an opportunity to share with them if they were getting special VIP treatment?"
"Yes, yes," Feinberg replied.
In other words, they heard some shopworn marketing cliches over the phone. As Feinberg said on CNBC:
When anyone entered on a phone call into the VIP 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.
It sounds just like the special pricing on my money market account that I get as a friend of Chuck [Schwab].
A primary deception, promoted by Feinberg, Margasak and others, is that internal communications, to which Dodd was not privy, prove that his knowledge of "preferential treatment."
"The simple fact that Angelo Mozilo and other high-ranking executives at Countrywide were personally making sure Mr. Feinberg handled their loans right, is proof in itself that the senators knew they were getting sweetheart deals," said Feinberg's principal attorney, Anthony Salerno.
Actually it's proof in itself that Anthony Salerno won't hesitate to insult your intelligence. Again, for senators to know they were getting sweetheart deals, Salerno would need to show:
a. There were sweetheart (i.e. materially better than market-priced) deals, when in fact there weren't;
b. That the senators knew that Mozilo personally made sure that Feinberg handled their loans, when in fact they only heard Feinberg's telephone blandishments, which would not sound credible to anyone with a modicum of sophistication.
Margasak pulls a similar stunt:
At his Feb. 2 news conference, Dodd said he knew he was in a VIP program but insisted he was told by Countrywide, "It was nothing more than enhanced customer service ... being able to get a person on the phone instead of an automated operator."
He insisted he didn't receive special treatment. However, the assertion was at odds with two Countrywide documents entitled "Loan Policy Analysis" that Dodd allowed reporters to review the same day.
The documents had separate columns: one showing points "actl chrgd" Dodd - zero; and a second column showing "policy" was to charge .250 points on one loan and .375 points on the other. Another heading on the documents said "reasons for override." A notation under that heading identified a Countrywide section that approved the policy change for Dodd.
Margasak falsified Dodd's claim. Dodd never insisted that he received no special treatment. Rather, he said that he had no reason to believe he was receiving special treatment, other than enhanced customer service. The fact that some internal records, not seem by Dodd at the time the loans were extended, show that he got a $2,700 reduction in fees, does nothing to refute Dodd's claim about his contemporaneous understanding. Larry Kudlow pulled a similar stunt in his attempt the fabricate a nonexistent discrepancy with Dodd's actual words.
Finally, anyone in banking will tell you that a $2,700 fee reduction on $781,000 in mortgage loans is not a "policy change." That's within the normal give-and-take negotiations between any retail customer and a mid-level manager. But Margasak is not interested in facts that might undercut his scandal narrative that happens to promote a right wing agenda.
Addendum: 8:00 pm July 28, 2009: Feinberg's Flimsy Testimony An excerpt of Feinberg's testimony, solicited in secret by Darrel Issa's staffers, shows how Feinberg was unable to substantiate his allegations about Dodd's state of mind. According to Feinberg, Dodd "knew" because everyone in the VIP had to know what was going on, even if it wasn't stated explicitly. Once again, Feinberg, like his enablers, attempts to conflate his understanding with Dodd's understanding.
Staffer: And do you know if during the course of your communications with Senator Dodd were his wife that you ever had an opportunity to share with them if they were getting special VIP treatment?
Feinberg: Yes, yes.
Staffer: You did communicate that to him?
Feinberg: Yes, yes. I mean, they'd already been there to begin with, so they knew. You know, once you're basically in the VIP department you're in. You know, you're done. You don't even have to really talk to Angelo if you don't want to, because as I keep stating, you go back and you see somebody at [the VIP unit], if you're not sure who they are then you'll talk to somebody. I may talk to Maritza. I may say do you know who this person? Oh, yeah, we did their loan such and such a time, this many years ago, or whatever. Yeah, that's a friend of Angelo's. Okay, we'll go with it. You might ask Doug or you might ask Stephen or somebody.