The House Oversight and Government Reform Committee has launched a wide-ranging investigation into the role of mortgage lenders in the global financial meltdown and economic crisis.
The Committee will demand information from mortgage giant Countrywide, Bank of America (which now owns Countrywide), Wells Fargo, JP Morgan Chase (including Chase Manhattan Bank), Citigroup, Residential Capital (GMAC), and U.S. Bank Home Mortgage. The panel also plans to issue subpoenas for records on Countrywide’s VIP program, including information on details of any mortgages held by members of Congress, as early as Friday, according to an internal e-mail obtained by The Hill.
“The actions of mortgage lenders contributing to the foreclosure and financial crisis are of serious concern to many Americans and to the Members of this Committee,” said Towns. “That is why I have opened an investigation into whether mortgage companies employed deceptive and predatory lending practices, or improper tactics to thwart regulation, and the impact of those activities on the current crisis.”
The move is a 180-degree change for Towns, who for months has stood firm against opening an investigation into Countrywide’s VIP program in the face of pressure from Rep. Darrell Issa (R-Calif.), the oversight panel’s ranking member.
“It is my goal to work through this matter in a bipartisan fashion and conduct a complete review of the role of mortgage companies in the current financial crisis,” Towns said in the release. “As part of this, we need to clarify unanswered questions about Countrywide Financial‘s VIP program, so I am issuing a subpoena to gather information about how that program worked and whether it provided special benefits to government officials. I am prepared to issue additional subpoenas if other companies fail to respond to our document requests.”
Democrats on the House Oversight and Government Reform Committee have been huddling since Thursday to hammer out the details of the subpoenas and concerns that any investigation into Countrywide’s VIP program would implicate several members, including prominent Democrats, as well as Republicans who were part of the VIP program. This could create a far-reaching scandal similar to the House banking controversy of the early 1990s, when it was revealed that the House allowed members to overdraw their House checking accounts without being penalized by the bank. The scandal implicated 22 members.
Countrywide, now owned by Bank of America, was reported to have given VIP loans and treatment to lawmakers and officials at the federal and local level who were in a position to influence policy affecting the mortgage giant. Rep. Edolphus Towns (D-N.Y.), the chairman of the panel, has two Countrywide mortgages, although he insists that he received no special favors.
The action comes after months of urging by Issa and days after the partisan sniping erupted after Democrats locked Republicans out of the committee room, one of the many acts of retaliation and tit-for-tat alleged on both sides.
Debate about the subpoenas focused on just how to structure them because the House Oversight Committee does not have the power to police other members of Congress.
Towns’s release says the subpoenas will direct information about members to the full ethics panel.
As of last night, top aides for Towns, including his staff director, Ron Stroman, were contacting staffers on House Ethics Committee to get their advice on how to structure the subpoenas and whether to instruct Countrywide to send the details about members’s mortgages to the Office of Congressional Ethics (OCE) or the full Ethics Committee.
“The Committee is about to initiate an investigation into possible financial benefits that Country-wide (sic) mortgage corp. may have provided to individuals including public officials in Country-wide’s VIP program,” Stroman wrote to a top ethics committee staffer. “The recommendation is that the subpoena direct Country-wide to send any information regarding Members of Congress to the Office of Congressional Ethics. We are planning on sending out the subpoena tomorrow.”
Democrats created the OCE last year at Speaker Nancy Pelosi’s (D-Calif.) urging. The investigative panel, which is made up of mainly former members of Congress, makes recommendations for further action to the full Ethics Committee and is meant to provide more independence to a process tarnished from years of partisan standoffs and political retaliation.
The OCE, however, cannot investigate whether members received favorable treatment from Countrywide because it is barred from looking into any member activity that occurred before it was created in March of 2008.
Democrats could direct the information to the Ethics Committee, but even in that case, the panel could defer to the Justice Department’s investigation. Months ago, Towns said he did not want to launch a probe because Justice was already reviewing the matter.
Democrats changed the locks on the door from the Republicans meeting room to the full hearing room in retaliation for a web video Republicans posted on the minority website poking fun at Democrats for canceling a planned mark-up last week when they discovered Issa was planning to call for a vote on the Countrywide subpoenas.
Republicans subsequently said they had the Architect of the Capitol’s office break the lock to open the door.
In the release, Towns denied locking Republicans out of the hearing room. It was unclear at press time what caused the difference in the two sides’ accounts of the alleged lock-out.
“Finally, I would like to address the widespread false reports that I locked Republicans out of their offices earlier this week,” he said. “These reports are incorrect. Republicans have at no time been denied access to the hearing room or their offices. The Ranking Member and I discussed how we can cooperate to prevent violations of House rules governing the use of hearing rooms, we reached agreement, and I consider this matter resolved.”