Lawmakers Tussle Over Mozilo Probe

Originaly by John R. Emshwiller and Kara Scannell: Lawmakers on a congressional oversight panel are struggling with whether to ramp up a probe into a controversial home-loan program at Countrywide Financial Corp. that involved former Chief Executive Angelo Mozilo.Rep. Darrell Issa, a Southern California Republican and the ranking minority member on the House Committee on Oversight and Government Reform, wants to subpoena records of the program known as “Friends of Angelo.” The program provided home loans on attractive terms to some people, including elected officials.

Mr. Issa said he believes the names of many favored Countrywide borrowers still aren’t known. “We want to know the size and scope of influence” of the program, he said.

The move comes on the heels of a civil fraud suit filed against Mr. Mozilo by the Securities and Exchange Commission.

But the committee chairman, New York Democrat Edolphus Towns, declined to co-sign a letter Mr. Issa sent earlier this month to Bank of America Corp., which purchased Countrywide last year, requesting records of the Friends of Angelo program.

A spokeswoman for Mr. Towns said the Friends of Angelo program wasn’t on the chairman’s priority list, which includes oversight of the nation’s financial crisis, the financial bailout of banks and the giant federal financial stimulus package.

In a written response last week to Mr. Issa’s letter, Bank of America’s lawyers said that while the bank “routinely cooperates with law enforcement and investigating committees,” it could “provide confidential customer information only pursuant to a subpoena.”

Only the full committee could issue such a subpoena. Late last week, Mr. Issa said he met with Mr. Towns and obtained the chairman’s support for issuing a subpoena.

Asked about Mr. Issa’s statement, the Towns spokeswoman said Friday she couldn’t confirm that a subpoena would be issued but would check with the congressman. She declined to comment Tuesday about the possible subpoena.

Mr. Issa said he understands there is some resistance within the committee to issuing a subpoena, but he still hopes one will go out.

The Friends of Angelo program has proved embarrassing for some loan recipients, whose ranks included two U.S. senators, Democrat Christopher Dodd of Connecticut and Democrat Kent Conrad of North Dakota. Both men, subjects of a Senate Ethics Committee investigation, have denied wrongdoing and said they didn’t do any favors to Countrywide.

Mr. Dodd has said his mortgage was at a market rate. Both senators, who also have said they weren’t aware of receiving special treatment, are cooperating with the ethics probe. The ethics committee didn’t return a call for comment.

Mr. Issa says investigations have shown that loans also went to influential Republicans. “This is a bipartisan problem,” he says.

Mr. Mozilo has denied the fraud and insider-trading charges related to claims by the SEC that he helped mislead the public about the growing riskiness of the home loans being made by Countrywide, at one time the nation’s biggest mortgage lender. Many of the loans were made in the so-called subprime market to less-creditworthy borrowers.

The SEC suit quoted internal Countrywide emails from Mr. Mozilo in which the executive described some of the company’s loans as “toxic” and “poison.” On one major mortgage product Mr. Mozilo wrote that the company was “flying blind” and had “no way” to predict how it would perform.

Robert Mintz, a former federal prosecutor who is now at partner at the McCarter & English law firm in Newark, N.J., and isn’t involved in the case, said the SEC complaint contains “only a handful” of emails out of possibly thousands written by Mr. Mozilo, but added that they “do seem to contrast sharply with his public statements.” That could provide support for filing a criminal case, Mr. Mintz said.

Mr. Mozilo’s attorneys have said they don’t believe there is any basis for civil or criminal charges when all of his statements and actions are taken into account. At the time of the SEC lawsuit filed earlier this month, an attorney for Mr. Mozilo said the complaint “does not tell the whole story of either internal communications or the public disclosures.”

Justice Department officials didn’t return calls seeking comment.