Did Obama Get a “Sweetheart” Mortgage Deal?
As reported by The Hill, an ethics complaint has been filed with the Senate Ethics Committee and the FEC regarding Barack Obama’s home mortgage.
Judicial Watch, a conservative legal watchdog group, filed the report after The Washington Post reported that Obama received a discount on a mortgage for a Chicago home valued at $1.65 million. The complaints said the Illinois senator received a loan at the interest rate of 5.625 percent, which Judicial Watch says is lower than the standard rate of between 5.93 and 6 percent indicated by surveys.
The complaint asks the Senate Ethics Committee to investigate whether the favorable rates constitute a prohibited “gift” under Senate rules.
Let’s take a look at the Senate Ethics rules regarding gifts.
1. (a)(1) No Member, officer, or employee of the Senate shall knowingly accept a gift except as provided in this rule.
(b)(1) For the purpose of this rule, the term “gift” means any gratuity, favor, discount, entertainment, hospitality, loan, forbearance, or other item having monetary value. The term includes gifts of services, training, transportation, lodging, and meals, whether provided in kind, by purchase of a ticket, payment in advance, or reimbursement after the expense has been incurred.
Well, the definition clearly includes the words “discount” and “loan” so perhaps there is something here. What we are to make of loans is a bit of a mystery as the word never appears again in the rules and guidelines applying to gifts. Discounts, however, are examined in detail, though they primarily apply to tickets for entertainment events, hotels and airline flights. The key there comes in references to “face value” of the article and the actual price paid.
Mortgages, as anyone who has been through the process knows, don’t have a face value. There are numerous considerations which determine what sort of rate you will get, depending on factors such as competitors’ rates, how much of a down payment you make, your credit history, income, and a variety of factors which the bank will factor into the “risk” associated with granting you the loan. And, yes, there is a marketing factor involved. Financial institutions will go the extra mile to get desirable accounts. Since Barack Obama had recently ascended to the U.S. Senate and his family had just realized a serious increase in their income, they were clearly a desirable account to land. (It’s always good to land such a customer, as wealthy people will often bring other business with them and require other financial instruments which will benefit the bank.)
The conservative blog Redstate quickly moved to draw a comparison between Obama’s mortgage and the situation between Senator Chris Dodd and Countrywide Finance. The Dodd situation, however, has a bit of a different look to it. Dodd was given a special “VIP status” by Countrywide, receiving a 4.5% loan with all points and fees waived. (Now that is a sweetheart of a deal!) And of course it is also worth mentioning that Dodd was the chair of the committee overseeing the banks at the time. For Obama’s bank to shave three tenths of one percent off of the current average for his rate, reportedly in response to an offer from a competing bank, doesn’t seem quite so generous.
Is it fair that banks give special treatment to famous, wealthy and powerful people? Speaking as one who will likely never get such an offer, I’d love to shout out, “No!” But then again, I long ago gave up on the idea that the world was fair. Since the charge has been made, it should be promptly looked into, but it seems like a tricky case to pursue at best. I’ll leave it up to the reader, at least for now, to decide if there is some sort of ethics breach here.
UPDATE: From the comments section, a link to FiveThirtyEight.com providing an earlier analysis of the story. An interesting addition, but it really provides nothing but more detailed speculation on what may have been contributing factors which I mentioned in general already. One of the more useful bits was this:
According to current rate quotes from myFICO.com, a borrower with very good credit can expect a mortgage rate about 30 basis points better than someone with pretty good credit, and a borrower with excellent credit can expect about a 50 basis point discount.
Obviously one of the factors the bank considers is the credit rating of the applicant, and it would come as no surprise at all to find out that the Obamas have a very good to excellent credit rating. This would go along with the factors I cited above in explaining why a 30 basis point “discount” might be offered to them, along with their general desirability as a customer. But unless someone would care to produce a copy of Obama’s credit report, it’s still speculation. The bottom line, yet again, is that the case for there being an ethics violation here is “sketchy at best” and the rate they received on their mortgage really doesn’t look all that surprising as compared to the Chris Dodd case. It’s a nice deal, to be sure, but nothing that any high profile customer with significant assetts and a great credit rating couldn’t land.
BONUS ROUND: Ed Morrissey thinks the deal smells bad, based mostly on the political contributions made to the Obama campaign from persons associated with Northern Trust, but doesn’t anticipate the case going anywhere.
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18 Responses to “Did Obama Get a “Sweetheart” Mortgage Deal?”
People with good credit ratings get lower interest rates than people with less than perfect credit. Chris Dodd's is definitely suspect, but Obama? Not so much.
[...] deal bothers me more than it does Jazz Shaw, who sees it as a lower-margin leader for more potential business from a wealthy client. The [...]
Not just good credit ratings. People who suddenly increase their income bracket by millions of dollars also get good deals, as making a little less on the mortgage may bring in other investment capital from the customer. Just the way of the world.
[...] [...]
Jazz — Nate at FiveThirtyEight.com did the best analysis of this I've seen when the story came out a week ago. (Link)
“Well, the definition clearly includes the words “discount” and “loan” so perhaps there is something here.”
No, actually, neither word supports that a “gift” was made because the discount (and of course the loan itself) is part of a business transaction, not a gratuitous transfer. By the logic of those offering this as a viable issue, a politician would have to report the difference between the sticker price and the amount paid for a car she bought. Maybe that's something a person would want to have disclosed, but it's just not what the actual reporting requirements are about.
What is the significance of this item, anyway? What does it say about Obama that he didn't report a transaction on disclosure statements when there is no precedent or custom for reporting such a transaction? Now, if there were even circumstantial evidence that a loan agent offered somebody quid pro quo and the politician accepted the deal, then there may a story; but this story is either talking point or hackery.
Jazz, it is to your credit that you want to shed light on troublesome aspects of our presidential candidates. It would be nice, however, if you contributed something productive to the discourse; there's enough irrelevancy out there as it is.
It's a story that is catching air time in the MSM already. I thought I made it fairly clear that there were differences between the Chris Dodd situation and this one, and that the propsed ethics charges are sketchy at best. I also went as far as linking to and quoting the applicable Senate ethics rules. I'm not sure what more “productive contribution” you're looking for.
This just in:
Conservatives are trying to keep Obama from winning the election.
Thanks for the link, Polimom. Post updated accordingly.
I was not commenting on your reasoning, your conclusion, or even the objectivity with which you approached the matter. But if your intention is to comment on all stories catching MSM airtime, I withdraw the point.
Personally, I'd find it more illuminating to hear about those stories that aren't. To answer your question, though, in my opinion a “productive contribution” to an irrelevant story that is already getting more play than it deserves is to ignore it.
I think this story is the GOP equivalent of those upper case OUTRAGE OF THE DAY from MediaMatters or the announcement of a CREW complaint (I imagine the DOJ has an office just to process CREW complaints).
Sen. Dodd's case is far more cut and dried corruption. Still, he is beloved of the Nutroots, so they will excuse him anything. I would not hold my breath for a CREW complaint about Dodd.
Alas, good ratings get preferential treatment. One of the banks I deal with offers a whole range of perks for customers with better credit ratings … such as gold colored debit cards, in contrast to the plebs blue or green … and different rules for account treatment.
No silver bullet for the GOP here.
I wouldn't pretend to have the time or inclination to comment on every story catching air time, but in a case like this, don't you think that pointing out the factors which make the accusation dubious is better than letting such an accusation fly across the sphere without comment? If you don't examine the charges and rebut them where deserved, you just allow the accusation to hang there and take root.
That's all well and good when there is an actual controversy. To me, there's no there there here. It's not just 'dubious,” it's pretty well unfounded–as further evidenced by your update and with which you seem to, in part at least, agree (“It’s a nice deal, to be sure, but nothing that any high profile customer with significant assetts and a great credit rating couldn’t land.”)
However, repetition of accusations (even if rebutted) will have the natural effect of raising people's suspicions. It's a balance of which you are no doubt aware, so I guess we just differ as to whether to apply more discretion in this case.
What's the difference.
Even if there was video (ala Marion Barry) of him accepting bribes, doing crack and having sex with small boys, you would still vote for him.
Democrats have never worried much about the “character” thing.
jwest, I think child sex might lose my vote. (Speaking of character, though, why exactly is it appropriate for someone running for president to off-handedly joke about the killing of Iranian citizens or for any mature adult to make deprecating jokes about a president's daughter? Hilarious.)
aba23 – 'might'. Funny, very funny.
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