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The Controversies That Have Dogged Sen. Dodd

By Adelaide Chen and Jonathan Jones

As chairman of the Senate Banking Committee, Chris Dodd, the senior Democrat from Connecticut, has enormous power in writing the rules regulating the banking, insurance and consumer credit industries. Over the last year, Dodd has proposed a series of reforms to regulate the financial system, including a bill supporting a new agency intended to look out for the interests of consumers. But Dodd has also found himself in hot water over allegations of unethical behavior and questionable judgment. Here's a closer look at the Dodd controversies:

A sweetheart mortgage deal?

In the summer of 2003, when mortgage rates were at their lowest in 45 years, Sen. Dodd and his wife, Jackie Clegg Dodd, decided to refinance their two homes (PDF), one in East Haddam, Conn., valued at $500,000, and the other in Washington D.C., valued at $792,000. Like millions of American homeowners, the couple chose Countrywide Financial Corp, the nation's largest independent mortgage lender at the time.

In the summer of 2008, Portfolio magazine published a story alleging that Dodd had received favorable terms in refinancing his homes under a Countrywide VIP program known as "Friends of Angelo," designed to accommodate clients valued by Countrywide's Chief Executive Officer Angelo Mozilo. A follow-up article cited Robert Feinberg, a former loan officer for Countrywide, who said the Dodds had received discounted mortgages on two homes.

The Dodds have repeatedly denied getting a sweetheart deal, pointing to industry analysts and reports that confirm their five-year adjustable rates were in line (PDF) with similar borrowers at the time with excellent credit ratings. Several news organizations including The Washington Post also concluded that the senator's mortgage rates appeared to be at or even above the prevailing rates at the time. Dodd told the Senate Ethics Committee, which opened an investigation after the publication of the Portfolio article, that he had never met Angelo Mozilo and that when he became aware he was receiving VIP treatment he inqired and believed it was part of a program that offered a higher quality of customer service.

In August 2009, the Senate Ethics Committee wrote Dodd with their findings (PDF) into the allegations. After a year of investigations, interviews and reviewing 18,000 pages of documents, the committee stated it could not find evidence of misconduct, clearing Dodd of violating the rule on accepting gifts. However, the committee chastised Dodd and fellow Senator Kent Conrad (D-N.D.), who also refinanced several loans through Countrywide and also was treated under the "Friends of Angelo" program. In its letter to Dodd the committee stated, "once you became aware that your loans were in fact being handled through a program with the name 'VIP,' that should have raised red flags for you."

The Dodds severed their loans with Countrywide in the summer of 2009. They refinanced at two separate banks (PDF), hiring an attorney as a third party, who solicited rates from lenders without revealing the Dodd name, and accepted two offers without negotiating.

Fannie Mae and Freddie Mac

As foreclosure rates skyrocketed across the country in 2008, Dodd found himself in hot water over his repeated insistence that Fannie Mae and Freddie Mac, the two embattled mortgage companies backed by the government, were "fundamentally strong."

"This is not a time to be panicking about this. These are viable, strong institutions," he maintained during a July 2008 Capitol Hill press conference. "The economics are fine in these institutions and people need to know that." Dodd was not the only politician saying this at the time; President Bush, Treasury Secretary Henry Paulson and Sen. Charles Schumer (D-NY), among others, all expressed support for Fannie and Freddie during the summer of 2008.

A few weeks later, Dodd helped push through the Housing and Economic Recovery Act, essentially giving Secretary Paulson the power to rescue Fannie and Freddie. On Sept. 8, 2009, the federal government was forced to use that power in what could turn out to be one of the most expensive bailouts of the financial crisis, costing taxpayers upwards of $200 to $300 billion, according to mortgage analysts.

In the decade leading up to the collapse, both mortgage companies poured millions into lobbying and campaign contributions to federal candidates, parties and committees. The companies donated mostly to Republicans when they were in power, and then reversed their spending patterns when Democrats took control. Out of 354 recipients of Fannie and Freddie money, Dodd received the most, taking $165,400 between 1989 and 2008, according to the Center for Responsible Politics. Then-Senator Barack Obama (D-Ill.) received the second-highest amount in contributions from the two firms, with $120,349.

FRONTLINE asked Dodd's office about his support of Fannie and Freddie. His spokeswoman Justine Sessions responded, "Senator Dodd never has and never will allow campaign contributions to influence his positions."

And in an interview for The Card Game, Dodd told FRONTLINE that it is precisely because of his role in the government bailouts that he's now one of the biggest backers of regulatory reform and overhauling the country's financial system.

"I listen to people..." Dodd told FRONTLINE. "I'm for public financing; I'm for anything else that would get us away from the system we have. But [the system] is what it is and so I appreciate the fact that they're willing to support it [my campaigns], as long as they understand that by doing so it doesn't necessarily buy you a vote or a position one way or the other, for or against things here. ... Anybody who thinks they can come in and make a campaign contribution and is going to get an outcome based on that is certainly terribly mistaken."

It's not clear whether these controversies could jeopardize Dodd's political career. A Quinnipiac College poll released Nov. 12, 2009 showed Republican challenger Rob Simmons beating Dodd by 11 points, and a recent Politico article described Dodd as "fighting for his political life."

UPDATE: In December 2009, Dodd announced that he would not run for re-election in 2009.

Adelaide Chen is a second-generation Chinese American, the first among her family born in the U.S.  She considers herself a native Californian, growing up in the Silicon Valley and has only ventured as far as LA and UC Davis.  Currently, she is working on her masters at the UC Berkeley Graduate School of Journalism.

Jonathan Jones is a journalist with the Investigative Reporting Program in Berkeley, California. He is currently working on a book about the rubber industry in West Africa.

posted november 24, 2009; updated january 25, 2010

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