Countrywide lent money to Fannie, Freddie executives

Countrywide Financial, which is now owned by Bank of America (NYSE: BAC), somehow managed to insinuate itself into nearly every housing related scandal of the current crisis.

Today's Wall Street Journal reports (subscription required) on some Countrywide loans made to senior executives at Fannie Mae (NYSE: FNM) and Freddie Mac (NYSE: FRE). In 2003, when Jamie Gorelick was vice chairman of Fannie, she received a $960,000 refinancing through Countrywide's now infamous Friends of Angelo program, which offered special deals to people CEO Angelo Mozilo wished to curry favor with. While he was COO of Fannie, Daniel Mudd received two $3 milion refinancings through Countrywide, but it's not known whether he received special treatment. Not surprisingly, everyone denies knowledge of having received special treatment.

As corruption scandals go, this one seems pretty weak. If a 1% interest rate reduction on a mortgage refinancing was enough to buy Countrywide influence, then these multi-million dollar executives were pretty cheap.

The real corruption in the mortgage industry was the disconnect between compensation and the long-term results of the loans made. Executives were corrupted by their own poorly-aligned pay packages, not floral arrangements and discounts on loans.