ANGELO’S ‘FRIENDS’

Angelo Mozilo was already well known in financial circles as chief executive of the beleaguered Countrywide Financial Corp., the nation’s largest mortgage lender and a major loser in the deepening credit crisis. He received $726 million in stock-options deals and compensation in 2007 when his company was losing $704 million.

This month, he suddenly became more widely known as the center of an exploding scandal over his secret list of “Friends of Angelo” and his granting of cut-rate sweetheart loans to prominent political figures including key senators involved in pending legislation to bail out borrowers as well as troubled lenders such as Countrywide.

Multiple investigations, including one by the Senate Ethics Committee, are looking into what, if anything, Mr. Mozilo hoped to gain from granting the preferential loans and what might have been said in e-mails related to the loans.

Heads are already falling. James Johnson, former chief executive of Fannie Mae, the quasi-government holder and guarantor of many home mortgages, abruptly resigned as an adviser to Sen. Barack Obama and the leader of his panel vetting possible vice presidential running mates. The Wall Street Journal broke the “Friends of Angelo” story on June 7, reporting on loans Mr. Johnson got, mostly at sub-market rates, for mortgages in Palm Desert, Calif.; northwest Washington, D.C., and near Sun Valley, Idaho.

Sen. Christopher Dodd, a Connecticut Democrat who chairs the Senate Banking Committee, which drafts the laws that govern Countrywide’s market, has probably lost any chance to be Mr. Obama’s running mate after the Journal reported that he received discounted loans under the “Friends of Angelo” program.

People who have received the special Countrywide loans have been squirming to explain themselves as best they can. Invariably, the say they sought no preferential treatment. And they seem to have no idea of how ordinary folks make loans. Sen. Kent Conrad, Democrat of North Dakota, said that his relationship with Countrywide started in 2002 when he was looking for a mortgage and called “a close friend of mine who knew a lot about mortgages.” The friend (who turned out to be James Johnson, the former Fannie Mae CEO) “happened to be with the head of Countrywide Financial” and put “a gentleman by the name of Angelo Mozilo” on the line for a 30-second conversation. Sen. Conrad said he was surprised to learn he had received favorable treatment. He donated $10,700 to Habitat for Humanity to cover what he saved through a 1 percent discount on a $1.07 million loan for a beach house.

Since the Ethics Committee is known for its tolerance of congressional wrongdoing, it seems up to ranking Senate Banking Committee Chairman Richard Shelby, a Republican from Alabama, and House Financial Services Chairman Democrat Barney Frank of Massachusetts to find out what Mr. Mozilo got or thought he would get from the favored borrowers. And Countrywide would do well to publish the entire list of favorites rather than let the names leak out one embarrassment at a time.