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Dodd Takes the Lead, Proposes Progressive Bailout

Politico (totally "in the tank," by the way) has a copy of Chris Dodd's alternative to Treasury Secretary Paulson's bailout plan for Wall Street. While Dodd provides the Treasury Department with the authority it needs to buy up all of Wall Streets "distressed assets" (that's the point of the $700 million), it comes with a bunch of provisions that Paulson neglected. Basically, Dodd is trying to seize this opportunity to achieve progressive goals that would not be manageable in a more market-, deregulation-, and Wall Street-friendly environment.

Authority for bankruptcy judges to restructure mortgages for homeowners facing foreclosure. This was considered a poison pill in a housing bill that passed Congress earlier this summer, but it has gained much more currency now that Washington wants to bail out Wall Street.

A provision that would require the Treasury to take a 65 percent portion of 20 percent any profits [sic] it makes from the newly purchased assets and put it into the federal government's HOPE program, an affordable housing program.

An oversight board that not only includes the chairman of the Federal Reserve and the SEC, but congressionally appointed, non-governmental officials.

Limits on executive compensation. This is a major stumbling point for Paulson in his negotiations with Congress, but cracking down on Wall Street executive salaries will be a major selling point for lawmakers. Dodd and Frank have put in place what's known as a "claw back" provision aimed at revoking compensation that executives received based on fraudulent claims.

An independent inspector general to investigate the Treasury asset program, appointed by the president.

Democrats control the Senate. If they want to, they can play hardball. They can tell the Republicans, "We insist that all or most of these provisions pass. If you block them, your buddies on Wall Street burn. And we tar you as playing obstructionist games during a time of national crisis." The Republicans can respond by holding up the bill and then arguing in the press that any inaction in a Democratic-controlled Congress is the fault of the Democrats. But with the public likely in favor of the common sense measures included in the Dodd bill, that would place the GOP in a very tight spot.

Comments

You did the million/billion thing. I know it's nitpicking, but still...

"that's the point of the $700 million"

Posted by: Douglas McClean on 09/22/08 at 2:45 PM Respond

No wonder Sen. Christopher Dodd won't release documents related to the $800,000 in cut-rate mortgages he got in 2003 from Countrywide Financial, once the nation's largest mortgage lender.Dodd feints and delays, but he can only stymie, not halt, the discovery of the details of his $800,000 in mortgages. Records show Dodd was more notable as part of the problem, a privileged public official who benefited even more than previously acknowledged.
It's getting easier to see why Dodd didn't keep his word and share basic records of his sweetheart loans before he left for his vacation at his home in Ireland. The veteran lawmaker's life as a VIP on Countrywide co-founder Angelo Mozilo's "Friends of Angelo" list saved him tens of thousands of dollars, but at a perilous price to his reputation.

Mozilo made doing favors for the powerful into a corporate mandate. Kowtow or be canned. His lobbyists and loan officers, according to Conde Nast Portfolio's Dan Golden, trolled Washington looking for borrowers in high places. Dodd was a prize catch.

Dodd and his wife own one home in Washington and a second in East Haddam. On June 10, 2003, Dodd signed a $506,000 mortgage at a steeply discounted rate (more than half a percent) of 4.25 percent, adjusting in five years. The document Dodd signed stated that the Washington property was his principal residence.

Three weeks later, Dodd was in Connecticut to refinance the $275,000 mortgage that he'd gotten 20 months earlier on his East Haddam property. When he got that mortgage in 2001, Dodd signed a "second home rider." Second homes are more expensive to finance due to increased risk — they aren't occupied as much — and because they don't receive the tax advantages the government and lenders give to principal residences.

But as a "friend of Angelo," Dodd did not need to trouble himself with the traditional restrictions placed on second home mortgages. Countrywide waived them for Dodd on the 2003 loan, according to a former company employee. Dodd's loan, reduced to a 4.5 percent interest rate shortly before the closing, adjusts after 10 years. This time there's no costly second home rider.
That omission will save Dodd thousands over the term of the mortgage. The worldly chairman of the Senate Banking Committee had to have known what a gift he was getting when Countrywide ignored rules and costs it imposed on other second-home borrowers.

There's more. Dodd got a $50,000 home equity loan on the East Haddam house, though second mortgages on second homes were rare at freewheeling Countrywide. That still wasn't enough. Dodd probably didn't realize that a careful reading of records reveals that on closing day he was going to borrow $276,150 to refinance his mortgage. That probably included enough to cover fees some harried worker compiling the closing documents at Countrywide assumed every borrower paid.

Posted by: Bobby on 09/22/08 at 6:02 PM Respond