Should Congress be the Jury or on Trial for the Housing Crisis?

There is so much finger pointing right now. Congress is desperately trying to find someone to blame. The blame will continue as more and more homeowners go into foreclosure. However, should Congress be on the jury or should Congress be on trial? Let’s take a look at some disturbing numbers, responsibilities, and facts.

The chief responsibility of Congress is that of making the laws for the government of the United States, which is designed to protect the citizens of this great country. Thus, the real chief responsibility of our politicians in Congress is to protect the American citizens.

In order to do so, Congress has to take all of the various sections of this overall task and break it down into committees. The committee that would have chief oversight over loans and the banking community is the United States Senate Committee on Banking, Housing, and Urban Affairs.

So where was this committee when mortgage companies were advertising 100% financing, no documentation loans, and ridiculous offers such as a payment of $1,000 a month for a million dollar home?

If they are the committee who is overseeing the entire banking and private loan process in our country, they were either blind or conveniently not doing their job.

Even though the real estate boom was filled with irresponsible lending, it was great for the economy. As long as the numbers look good, politicians get re-elected. From a political standpoint, you can worry about the consequences later when it will be much easier to conveniently find someone else to blame.

If you start putting the puzzle together, it gets even more disturbing. A recent story was released stating that Senator Christopher Dodd got a special deal on a loan through Countrywide. Who is Countrywide? They are the poster child for the mortgage crisis we have in this country. There are plenty of accusations and lawsuits citing fraud and unethical business practices. A former regional vice president is suing Countrywide for being wrongly fired after he reported fraudulent lending practices to superiors and refused to approve mortgages for unqualified buyers.

The lawsuit states that some loan officers would inflate housing values in order to get loans written and encourage people to lie about their incomes in order to qualify for the loans. Incidentally, these were referred to as “lying loans.”

So, who is Senator Dodd? Well he is the chairman of the United States Senate Committee on Banking, Housing, and Urban Affairs. The committee who oversees the very industry where there is the crisis. By the way, he referred to Countrywide as being “abusive” in their lending practices earlier this year. However, back in 2003 when he got a special deal that a normal consumer wouldn’t be able to get, I guess they weren’t so abusive.

Let’s look at something else very interesting concerning Senator Dodd. To his credit, he did not oversee the creation of the mortgage crisis. He was elected chairman in 2007. Republican Senator Richard Shelby gets the credit for that “oversight.”

If you look at Senator Dodd’s campaign contribution record, roughly $5 million of the $8.4 million raised between 2003 and 2008 was from the investment and securities industries. Of course, this is THE group that has the most to lose if Congress does not step in and do something about the foreclosure crisis.

I also looked at Senator Shelby’s contribution record while he was the chairman of that committee. Only $553,000 of the $9 million raised between 2001 and 2006 came from the investment and securities industries.

Does it strike you a little bit odd that Senator Dodd is getting over half of his campaign contribution from the very industry that he oversees and is supposed to regulate?

Is it far to say that our politicians might be responsible for the creation of this mess? Obviously, there is personal responsibility on behalf of those who signed on the dotted line.

However, Congress is also supposed to create an environment that protects us from ourselves and that is where they failed.

I bring all of this up to make a point. We are in a big election year. The influence of campaign contributions, ignoring problems, and special favors would go away if Americans would vote. The sad irony is that we have the power to change politics in Washington and hold these politicians accountable. Unfortunately, that will never happen when only 58% of Americans make it out to the polls (based on the 2004 elections).

Maybe we should point the finger at American apathy.

As a side note…As a result of Christopher Dodd and another Senator Kent Conrad getting sweetheart deals from Countrywide, a request was made to all senators to divulge their mortgage information. All but one senator gave their information. Senator Maria Cantwell (Dem. Washington) was the only senator not to provide such information. Public records show that she has her loan with……Countrywide.

Copyright © 2008 Prudent Money and Bob Brooks. All rights reserved.