On a day when Linda McMahon badly needed a fresh issue and a new story line in her U.S. Senate race, the Republican multi-millionaire found it in the strangest of places — two political journals with a long history of promoting liberal causes, The Nation and Mother Jones.
The Nation reported Thursday that taxpayers ultimately may pick up the tab on a ballyhooed settlement that her Democratic opponent, Richard Blumenthal, and attorneys general in 10 other states reached in 2008 to settle predatory lending claims against Countrywide Financial.
Building on reporting and analysis by Mother Jones, the Nation concluded that Blumenthal, the state attorney general, turned out to be wrong when he announced in October 2008 that the cost of the settlement would be born by Countrywide’s new parent, Bank of America.
“This settlement will cost Bank of America as much as $8.6 billion, but no cost, not a dime, to taxpayers,” Blumenthal said.
But the Obama administration the following year created a loan-modification program that Bank of America has used to offset much of its write down of interest and principal owed on tainted mortgages written by Countrywide.
“In fact, much of the settlement’s cost has been covered by taxpayers,” The Nation reported. “Bank of America is allowed to use federal incentives under President Obama’s $75 billion Home Affordable Modification Program (HAMP) toward the loan modifications it is required to make as the mortgage servicer for the Countrywide portfolio.
“In total, of its entire Countrywide financial servicing portfolio-which goes beyond the loans covered by the settlement-BofA is eligible for as much as $4.5 billion in federal incentives for completed modifications, according to an analysis by the Center for Public Integrity as reported in Mother Jones. That’s a hefty government rebate.”
True, that is a big rebate. On the other hand, when Blumenthal and the other attorneys general settled the case in 2008, they had no way way of knowing that Bank of America would be held harmless by federal incentives that didn’t exist until 2009.
That was pretty much the response Blumenthal’s campaign manager, Mindy Myers, issued at 10:40 p.m.:
“Four months after the settlement was signed, in an action Dick could not have predicted, the Obama Administration created the HAMP program with funds from the Wall Street bailout that Dick opposed. Dick Blumenthal has a long record of fighting predatory lending by the big banks and working to keep people in their homes.”
No matter. The story immediately forced Blumenthal’s staff to research the issue on a day that otherwise would have had but one simple story line: the resurgent campaign of Blumenthal.
The Nation published its story on a day when a new Quinnipiac University poll found that Blumenthal’s lead over McMahon has grown from 3-percentage points to 11-percentage points in the last two weeks.
With McMahon on the defensive over stories about steroid abuse and sexually explicit programming by her family’s company, World Wrestling Entertainment, the story gave her a campaign a welcome opportunity to change the subject.
“I think it s absolutely going to be an issue that we’re going to continue to talk about,” said Ed Patru, her communication director. “It’s utter incompetence.”
One of McMahon’s fellow Republican candidates, Jerry Farrell Jr., might disagree. In 2008, he shared Blumenthal’s opinion, praising the settlement as the commissioner of consumer protection. He now is the GOP nominee for secretary of the state.
In a joint press release issued two years ago with Blumenthal, Farrell praised the settlement as relying on bank funds, not the public treasury.
“In these harsh economic times, when government is being called upon to bail out financial institutions for their unsound business practices, this settlement sends an important message to those responsible for defrauding consumers — they will be held accountable,” he said.