Years from now, when historians and economists examine the origins of the housing market collapse of 2007-08, they probably won’t devote a lot of time to a report that was released this week by the U.S. House Oversight and Government Reform Committee.
The report may only rate a footnote in history books.
That’s because influence peddling, inside dealing, cronyism, and preferential treatment for policy makers is so persuasive it is taken for granted as business as usual in our government.
The report detailed how lobbyists and other officials with the now defunct mortgage company Countrywide Financial gained influence in Washington, D.C., by giving members of Congress, their staffs and executive-branch officials discounted home loans.
The company, which was once the biggest U.S. mortgage lender, granted hundreds of special loans to key power brokers which played a critical role in blocking legislation that would have reformed the mortgage industry, according to the report.
Those reforms included stricter oversight of an industry that was booming at the time but would later go bust causing the worst financial crisis since the Great Depression.
Republican and Democratic congressmen got deals on loans which included lower rates and the elimination of certain fees. So did top officials at Fannie Mae and Freddie Mac.
The two companies, rescued by the government in 2008, have drawn nearly $190 billion in taxpayer funds to stay afloat, according to Reuters.
Countrywide’s influence peddling wasn’t the sole cause of the housing bust which wrecked the economy. Decades of financial deregulation is the real culprit.
But it is another example of how big-moneyed interests are able to subvert the legislative process for their own self-interest.
It is doubtful anyone will be prosecuted as a result of this investigation. Some of the congressmen who benefited from the special loans have already been cleared of any wrongdoing by congressional ethics committees.
We should be appalled. But influence peddling in government doesn’t shock us anymore.