The Senate Ethics Committee released two letters (Dodd, Conrad) today clearing Sens. Chris Dodd and Kent Conrad of ethics violations in a case where both senators were members of a Countrywide "VIP" loan program. These letters concluded a year-long investigation into the "VIP" program and the loans the senators received.

The Committee found that the two senators did not violate Senate ethics rules prohibiting members from accepting outside gifts. The rule in question does not cover "loans from banks and other financial institutions on terms generally available to the public." The committee also ruled that while the "VIP" loans did offer "quicker, more efficient loan processing and some discounts," the discounts provided "were not the best deals that were available at Countrywide or in the marketplace at large."

The senators did receive a chiding for not exhibiting care in their dealings with Countrywide. The Committee told both senators that they "should have excercised more vigilance in [their] dealings with Countrywide in order to avoid the appearance that [they] were receiving preferential treatment based on [their] status as Senator[s]."

In response to the investigation that Committee declared that it should have issued guidance on the receipt of loans and the involvement of senators in special loan programs. The Committee expects to issue a guidance to members in the future.

The organization that filed the initial ethics complaint, Citizens for Responsibility and Ethics in Washington (CREW), stated in a blog post that this amounts to "battered wife" syndrome.

"Like a battered woman who explains she brought the beating on herself, the committee faulted itself for failing to ‘provide more guidance to the Senate community about issues surrounding mortgage negotiations.’ Over a year has passed since CREW filed its complaint and the committee became aware of this issue. Now would be a good time for the committee to start proactively providing its promised advice.”

The Ethics Committee could also review legislation that has been introduced requiring limited disclosure of home loan information on personal financial disclosure forms (S. 1632).

One way that transparency can directly affect outcomes is when information is released in ways that preempt bad decisions. In the case of the federal bailouts, the possibility of transparency averting the impolitic decisions of bonuses and bogus assertions seems particularly acute. Transparency could also help consumers by providing information prior to and during a decision-making process, like purchasing a home. I thought this quote from Timothy Day, vice president of government affairs with data analytics firm Teradata, in this NextGov post summed it up pretty well:

"If a bank had shown more information [last year] as it relates to their mortgages, people making $100,000 salaries would not be getting $500,000 mortgages," he said. "The government is never really going to have true transparency and true accountability unless there is more data in a centralized database."

Budgeting political risk helped Fannie Mae, Freddie Mac, and financial services companies avoid the kind of scrutiny they needed from Congress for the past several years. Millions of dollars in private travel, campaign contributions, and lobbyists-galore created a border wall that no regulation or reform could climb over. Florida Rep. Tim Mahoney's hole gets deeper as a 2nd affair is revealed, the FBI opens and investigation, and the Democrats ditch him. There's more in this round-up of today's news:

Dave Jamieson at The New Republic looks into the lavish treatment members and staffers of the House Financial Services Committee received from Fannie Mae, Freddie Mac, and financial services companies in the years preceeding the collapse of the industry. Former chairman Mike Oxley, who now works for NASDAQ and as a lobbyist, approved a half-million dollars worth of privately paid travel, much of it offered by financial services companies. Fannie Mae and Freddie Mac had approximately one lobbyist for each member of the 70 person committee. Campaign contributions were spread around like butter on cornbread. Of course, all of this largesse eventually lured numerous staffers and committee members into the private sector and Jamieson names names:

Former Oxley adviser Carter McDowell moved on to the American Bankers Association; Karen Lynch Calton, one-time counsel to the committee, has lobbied for the Consumer Bankers Association; Greg Zerzan, an aide to Oxley, eventually went to the International Swaps and Derivatives Association; Linda Dallas Rich, a committee adviser, headed to the New York Stock Exchange; longtime Oxley aide Clinton Jones hopped to Fannie for a spell, before returning to Congress to serve Bachus on the finance committee; and even though Baker had been a perennial foe to the GSEs, the congressman's own former chief of staff, Duane Duncan, became a star on Fannie's lobbying team.

Rep. Tim Mahoney is in a load more trouble after the Associated Press revealed another affair and ABC News, the team that broke this story, reported that the FBI is investigating the allegations of hush money paid to the first reported mistress. It is alleged that Mahoney hired Patricia Allen, the first reported mistress, to both his campaign and congressional staffs. After things went sour (she discovered he was having another affair) Mahoney fired her and allegedly paid her $121,000 to keep her from filing a wrongful termination lawsuit. Speaker Nancy Pelosi called for an ethics committee investigation (although those haven't really led to anything since, I don't know, the 1990s) and House Democrats effectively abandoned the freshman Florida congressman to fend for himself in a difficult district.

The defense team in Sen. Ted Stevens' trial for filing false statements on his personal financial disclosure forms is attempting to show that the home renovations at the center of the charges were done for VECO's Bill Allen and not for Stevens. Stevens' daughter, Susan Stevens Covich, testified that when she appeared at her father's Girdwood, Alaska home to spend time while visiting Allen was present in numerous other people, often taking up all five available bedrooms leaving her to sleep on the couch. Covich said she stopped staying there after Allen's constant presence became "creepy". Previously, defense attorneys have shown that Stevens spends most of his time living in Washington, DC and not at the home in Girdwood. The judge presiding over the case stated that the case will likely be handed to the jury next week.

Dan O'Neill (of Everyblock fame) is calling for publication of all mortgages that the government (read "we") is going to buy in the bailout bill.

.... I'd like them to publish a list of all of the mortgages they purchase -- the loan number, the address of the property, the lender, the amount of the loan, the status of the loan, the plaintiffs and defendants in any associated foreclosure cases, and so on.

As far as I can tell, it's not currently possible for the public to determine the underlying assets of any of the mortgage security instruments that have been the subject of so much pop-culture sturm und drang. We all know that this is a big story, because the papers scream it and the numbers are enormous.

But we also know that it's a big story because it is a local story. Foreclosures are plainly visible all of us, all over the country. We all know people -- or are someone -- affected directly by failing mortgages, decreasing home prices, and the accompanying social problems like crime, blight, homelessness, downward mobility, and despair.

Though it goes without saying, we assume Dan's talking about publishing these lists with an API or in a downloadable format so that the information can be mashed by developers.

Do you hear us Congress? (I'm going to note this suggestion at PublicMarkup.org.)

The consideration of the $700 billion bailout bill — now lovingly known as the Authorization for Use of Financial Force — has turned into a thriller as the clock winds down on the session of Congress (set to end on Friday) and the stability of markets and financial institutions. Lobbyists for large business trade groups are racing down tips and attempting to defuse unpalatable proposals, limits on executive compensation and bankruptcy relief for homeowners, like Jack Bauer would a nuclear device. According to The Hill, the Chamber of Commerce's lobbyist Bruce Josten says, "If we don’t move quickly, we could be in the soup."

One lobbyist is using a flow chart to track proposals, others are reading reports at 4 am. Red Bull sales are probably through the roof. One thing that's for sure, these lobbyists, the one's who have worked hard to prevent any kind of oversight of the financial system and the mortgage market leading up to this crisis, are now working to prevent anything punitive or helpful to those who've lost their homes in this mess.

Francis Creighton, vice president and chief lobbyist with the Mortgage Bankers Association: "Bankruptcy is such a divisive issue in this debate, and resurrecting bankruptcy right now is completely unproductive ... This bill we are talking about is not a mortgage bill, not a housing bill. It’s supposed to address the threats to the entire economy.”

Steve Verdier, a lobbyist for the Independent Community Bankers Association (ICBA), on bankruptcy relief: "We are vigorously opposing that ... If that happens, then the mortgage rates for other consumers are going to go up.”

American Banking Association in a letter to Congress: “Authorizing write-downs of mortgages by bankruptcy judges will increase the risks of mortgage lending at a time when the market is already struggling”

During the 2008 cycle the three trade groups represented by these individual lobbyists have spent $3.1 million on PAC contributions to congressional lawmakers. Over the same time period they've spent $8.9 million dollars on lobbying Congress. (Data from OpenSecrets.org) That amount of money gives them the access they need to get their message to Congress.

During this lobbying feeding frenzy, Congress should be asking themselves one simple question, "Should I be listening to the very people who helped cause this mess? Shouldn't I try to listen to someone else?"

If lawmakers wanted to they could go to PublicMarkup.org and see what people are saying about each section of both the Dodd proposal and the Paulson proposal. It could be a useful way to have a discussion directly with people concerned about the bill, rather than the money merchants of K Street. Already, 81 comments have been left on the Dodd bill and 41 on the Paulson proposal.

So, the indictment is in and the charges against Sen. Ted Stevens include seven counts of making false statements on his personal financial disclosure forms from 1999-2006. Many of these false statement counts revolve around work done on Stevens' Girdwood, AK home courtesy of the VECO oil company. Sunlight's Bill Allison makes the case at Real Time Investigations that if the money spent on equipment, parts, and labor did not constitute a gift, but rather a loan, then Stevens would be allowed to omit them from his disclosure forms, thereby acquitting him of several false statement charges:

[F]rom my quick read of the indictment, it appears that the government is suggesting that when Stevens says he has no liabilities of more than $10,000, that means the hundreds of thousands of dollars Stevens is alleged to have received as benefits from VECO couldn’t possibly have been loans. But if (and for the record, I doubt this is likely), if Stevens was borrowing money, labor and materials to renovate a residence from VECO rather than accepting it as a gift, I’m not sure Stevens would have to report it under current personal financial disclosure rules, which say,

property which is held or maintained solely for recreational or personal purposes does not have to be reported…. (p. 131)

and

Mortgages secured by a personal residence (including secondary residences) that are not used for rental purposes do not have to be disclosed. (p. 136)

Suppose there was some understanding Stevens would repay Veco or its CEO, Bill Allen, for the home repairs, the car swap, the furniture and so on — shouldn’t the public know of those potential conflicts of interest? The indictment reminds us,

The primary purpose of the yearly Financial Disclosure Forms is to disclose, monitor and deter conflicts of interest, thereby maintaining public confidence in the integrity of the United States Senate and its Members. Because the yearly Financial Disclosure Forms require public disclosure of financial information by each Member of the United States Senate, such as income, assets, gifts, financial interests, and liabilities, the Forms provide the public at large, including the voters of a particular state, with the information necessary to allow the public to evaluate and consider official conduct by a Member of the United States Senate in light of that Member’s private finances.

Do the current disclosure requirements adequately “deter conflicts of interest, thereby maintaining public confidence in the integrity of the United States Senate and its Members,” if they exempt personal residences, mortgages, car loans and so on from public view?

As Bill says, it is highly unlikely that these were loans and not gifts. One would have to assume that the cooperating witness identified in the indictment, VECO CEO Bill Allen, provided enough information to prove that there was no intention of repayment. Also, as I previously noted in the previous blog post, paragraph 17 of the indictment suggests (although the DOJ insistently declared that it does not allege) a possibility of quid pro quo:

17. It was a part of the scheme that STEVENS, while during that same time period that he was concealing his continuing receipt of things of value from ALLEN and VECO from 1999 to 2006, received and accepted solicitations for multiple official actions from ALLEN and other VECO employees, and knowing that STEVENS could and did use his official position and his office on behalf of VECO during that same time period. These solicitations for official action, some of which were made directly to STEVENS, included the following topics: (a) funding requests and other assistance with certain international VECO projects and partnerships, including those in Pakistan and Russia; (b) requests for multiple federal grants and contracts to benefit VECO, its subsidiaries, and its business partners, including grants from the National Science Foundation to a VECO subsidiary; and (c) assistance on both federal and state issues in connection with the effort to construct a natural gas pipeline from Alaska’s North Slope Region.

There is likely more information yet to be revealed, as the DOJ stated the investigation is ongoing, that would prove that these gifts and not loans.

Returning to Bill's chief point, there is a clear loop hole exposed in the system of conflict of interest disclosure. The personal financial disclosure documents are important in the revelation of conflicts of interest and ought to reveal all conflicts that lawmakers hold. In recent months and weeks, the number of stories highlighting conflicts that arise from the ownership of personal homes is putting a spotlight on the need for greater disclosure.

Sens. Chris Dodd and Kent Conrad received favorable mortgages on homes from Countrywide. Only Conrad disclosed his mortgage and home on his personal financial disclosure form. Rep. Laura Richardson defaulted on numerous mortgages which should have been disclosed but were not. And today it was reported that Rep. Joe Knollenberg undervalued his D.C. residence on more than one financial disclosure.

After considering these cases, most egregiously the case of Sen. Stevens, I'll let you comment on Bill's final question:

Do the current disclosure requirements adequately “deter conflicts of interest, thereby maintaining public confidence in the integrity of the United States Senate and its Members,” if they exempt personal residences, mortgages, car loans and so on from public view?

Last month, after Portfolio revealed that Sens. Chris Dodd and Kent Conrad received favorable loan deals from mortgage giant Countrywide, members of the Senate Ethics Committee attempted to attach an amendment to housing relief legislation that would require the disclosure of mortgages and their details for members of Congress in their annual personal financial disclosure reports. The amendment was ruled non-germane and was dropped from consideration.

In the House, Rep. Mark Souder is keeping the disclosure flame alive, introducing a bill to require mortgage disclosure on personal financial disclosure reports. Souder's bill would mandate the disclosure of home mortgages including the name of the creditor, the interest rate on payments, the number of years remaining, and the amount of the mortgage.

This is a good step in providing more detailed and accurate information on personal financial disclosure reports, and certainly a proper response to the Countrywide revelations. Congress should take this issue seriously and aim to adopt the transparency reforms in Souder's bill.

For further steps on clarifying and furthering disclosure in personal financial disclosures, you can see Ellen Miller's Op-Ed in Roll Call (no subscription needed this time) from a few weeks ago.

Despite a string of revelations revealing innappropriate home loans, rent prices, and rental arrangements maintained by lawmakers, Congress refuses to make appropriate disclosure changes to ensure proper public knowledge about all conflicts of interest. A few weeks back I wrote about potential rules changes proposed by the members of the Senate Ethics Committee requiring the disclosure of all home loans, even against personal residences, closing the personal residence loophole. That reform, offered in the form of an amendment to a housing bill, was ruled non-germane and was not adopted. It looks as though we will have to wait until next year to see if Congress remains serious about reform:

Despite a spate of revelations in recent weeks that House and Senate lawmakers received special deals on mortgages and rental agreements, it appears unlikely Members will be required to divulge the financial details of their homes anytime soon, with little momentum in either chamber to revisit ethics rules before next year. “Any suggestions to change the rules will be addressed in the 111th Congress,” said Nadeam Elshami, Speaker Nancy Pelosi’s (D-Calif.) spokesman.

In other news, staffers are taking on more work raising money for their bosses by acting as the chief attraction at fundraisers, particularly those hosted by lobbyists.

Back from PDF Conference in NYC; how is Tom Ridge like Adil Hoxha?; more mortgage disclosures; congressional ethics office empty; and more failed challenges from Hall of Shame indictee William Jefferson.

For two years, former Homeland Security Secretary Tom Ridge failed to disclose that he lobbied and consulted for Albania. After a Justice Department interview Ridge decided to finally file a disclosure under the Foreign Agents Registration Act. Despite assurances from spokesmen at Ridge's consulting firm, Ridge Global, that Ridge was not involved in any lobbying in the U.S., his disclosure lists meetings with congressmen on behalf of Albania. Perhaps more disturbing than this disclosure oversight is the reality of the Justice Department's intervention, which was spurred not by oversight or investigation, but by media reports. I'd like to think that oversight of foreign lobbyists was not led by someone reading the Washington Post for clues and nothing else.

The Politico's effort to get senators to reveal the mortgages on their personal residences is continuing along as only 15 senators have refused to answer.

Created earlier this year to provide an independent check on ethics, the Office of Congressional Ethics will be statutorily functional in two weeks. There's only one problem: the office has yet to be staffed. In fact, according to Roll Call, none of the top prospects in academia, law, and retired lawmakers have been contacted. Rep. Steny Hoyer gets about as obtuse as possible when saying, "We established an ethics office." Okay, now staff it.

Rep. William Jefferson, at the center of a Nigerian phone scam gone wrong, lost another challenge in court. Jefferson tried to get statements he made while the FBI searched his house and questioned him thrown out of court because he was not read his Miranda rights. Of course, police only need to read Miranda rights if you are arrested.