Freddie Mac Pays Republicans to Scuttle Bill

This story has more legs that I can count.

Freddie Mac secretly paid a Republican consulting firm $2 million to kill legislation that would have regulated and trimmed the mortgage finance giant and its sister company, Fannie Mae, three years before the government took control to prevent their collapse.

In the cross hairs of the campaign carried out by DCI of Washington were Republican senators and a regulatory overhaul bill sponsored by Sen. Chuck Hagel, R-Neb. DCI's chief executive is Doug Goodyear, whom John McCain's campaign later hired to manage the GOP convention in September.

Freddie Mac's payments to DCI began shortly after the Senate Banking, Housing and Urban Affairs Committee sent Hagel's bill to the then GOP-run Senate on July 28, 2005. All GOP members of the committee supported it; all Democrats opposed it.

In the midst of DCI's yearlong effort, Hagel and 25 other Republican senators pleaded unsuccessfully with Senate Majority Leader Bill Frist, R-Tenn., to allow a vote.

"If effective regulatory reform legislation ... is not enacted this year, American taxpayers will continue to be exposed to the enormous risk that Fannie Mae and Freddie Mac pose to the housing market, the overall financial system and the economy as a whole," the senators wrote in a letter that proved prescient.

Unknown to the senators, DCI was undermining support for the bill in a campaign targeting 17 Republican senators in 13 states, according to documents obtained by The Associated Press. The states and the senators targeted changed over time, but always stayed on the Republican side.

Countrywide says Foreclosures Highest on Record

Regardless of how many times Neil Cavuto or any other financial pundit tells you how peachy the housing market is, the reality is far different.

Countrywide Financial Corp (CFC.N), the largest U.S. mortgage lender, said on Wednesday that foreclosures and late payments rose in December to the highest on record, though it made more loans than expected in the fourth quarter.

Its shares fell as much as 20.2 percent as concern persisted that Countrywide might seek bankruptcy protection. The shares fell 27.4 percent on Tuesday though Countrywide rejected an identical rumor.

"Rumors of bankruptcy are still surrounding Countrywide," said William Lefkowitz, options strategist at brokerage firm vFinance Investments. "Investors still believe that they need an infusion of capital."

In its monthly operating report, Countrywide said the foreclosure rate among the 9.03 million mortgages for which it collects and processes payments doubled to 1.44 percent from 0.70 percent a year earlier, and rose from November's 1.28 percent. The delinquency rate rose to 7.20 percent of unpaid balances from 4.60 percent a year earlier.