In June of 2008, documents and e-mails from Countrywide Financial Corp., now part of Bank of America Corp. (NYSE: BAC), revealed that some mortgage borrowers had more than just a solid credit score on their side. The VIP borrowers, known as “Friends of Angelo” for their relationship with former Countrywide CEO Angelo Mozilo, reportedly got better loan terms than were generally available to other borrowers.

There’s nothing illegal about a lender treating some borrowers better than others, but when the special borrowers include two US Senators, several former Cabinet secretaries, and plenty of officials from Fannie Mae and Freddie Mac, the deals get a fair amount of attention. The inference, of course, is that a powerful borrower who gets a good deal on a mortgage will look for an opportunity to return the favor to the lender.

Now, the US House Oversight committee, chaired by a Republican for the first time since 2006, has issued a subpoena to BofA for more documents related to the loans, most of which were made to Democrats. In 2009, complaints against Senators Christopher Dodd and Kent Conrad were dismissed by the Senate Select Committee on Ethics. The committee did say that the senators should have been more vigilant to avoid the appearance of playing tit-for-tat with Countrywide, but was unable to find any credible evidence that the senators had violated the Senate’s ethics rules. That probably says more about Senate ethics than it does about anything else.

It can be argued, as The Wall Street Journal did in 2009, that the loans were “a documented effort by a company at the center of the mortgage meltdown to influence Members of Congress with favorable loan terms.” Yet Senator Dodd, who was chairman of the Senate’s banking committee, certainly didn’t act the way one would expect a bought-and-paid-for senator to act when it came to banking reform. Dodd retired from the Senate in 2010, and Conrad is retiring in 2012.

The slow-moving House investigation will pick up speed now that Republican Rep. Darrell Issa chairs the committee. According to Issa, “Countrywide orchestrated a deliberate and calculated effort to use relationships with people in high places in order to manipulate public policy and further their bottom line to the detriment of the American taxpayers even at the expense of its own lending standards.”

The fact that Countrywide went bankrupt and the fact that CEO Mozilo was charged with securities fraud and insider trading won’t keep the House committee from wasting a lot of time and money on an issue that is essentially history. There will be more headlines strategically trotted out as needed in the run-up to the 2012 elections, but there won’t be much new information and almost certainly no new charges. It’s the perfect political issue.

Paul Ausick

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