Jeffrey Birnbaum, writing in the Washington Post, reports lobbyists wrote key portions of the mortgage bailout bill:
Credit Suisse, a large investment bank heavily invested in mortgage-backed securities, proposed allowing hundreds of thousands of homeowners to refinance their mortgages with lower-cost government-insured loans, relieving financial institutions of the troubled debt.
After the bank proposed this to Congress in January, it became known as the “Credit Suisse plan” among congressional staffers and lobbyists. It later formed the basis of housing provisions in both the House and Senate.
Bank of America, which is acquiring Countrywide Financial, the country’s largest mortgage lender, followed with a similar and more detailed proposal, principal negotiators on the legislation said.
In approaching congressional aides, the lobbyists suggested that banks take less than full payment for the distressed loans on their books. But the measures would allow financial institutions to get cash out of foreclosed properties that would otherwise sit on their books as dead weight.
Since the new loans would be guaranteed by the Federal Housing Administration (FHA), taxpayers would ultimately pay for defaults. The Congressional Budget Office projected that this could cost $1.7 billon over five years.
Last Friday, Stephen Spruiell of National Review posted an internal document from Bank of America — it looks more like an explanation of Dodd-Shelby’s purpose and some talking points for selling it rather than legislative language, but Spruiell’s assertion — “This discussion document (dated March 11, 2008) would appear to support the contention that BofA essentially wrote the bailout section of the bill. Almost all of BofA’s preferences are mirrored in the Dodd-Shelby legislation.”
Given that Sen. Chris Dodd, D-Conn., doesn’t know what the interest rates are, it’s probably better that he’s not writing the bills anyway. (Dodd, of course, got a preferential mortgage from Countrywide Financial, which Bank of America is acquiring.)
Clarification: Reynolds did note the role of Bank of America cited by Spruiell. I was surprised he didn’t link the Binrbaum story, which confirms their role. In any case, it certainly wasn’t intended as a dig — he’s been link central on the Countrywide story, one that I don’t think we’ve seen the end of yet (far from it).