Report: Reps. McKeon and Gallegly tied to VIP loan scandal

Veteran California Republican Reps. Howard McKeon and Elton Gallegy acknowledged on Saturday that they received VIP loans from Countrywide Financial, which is under investigation for possibly giving lawmakers special treatment to win political favors, The Wall Street Journal reports.

McKeon and Gallegly were among the four names sent to the House Ethics committee by House Oversight Chairman Darrell Issa (R., Calif.), who is investigating Countrywide's VIP Program.

A spokeswoman for McKeon told The Wall Street Journal that McKeon was "pretty shocked and angry" when he learned that he was listed as a VIP loan customer. She said the lawmaker, who chairs the Armed Services Committee, had not known that his 1998 home loan had gone through any special program.

McKeon's loan was for $315,000, and he no longer owns the property, according to the report.

Gallegy told The Journal that he would have "run away from" any deal that would have required special favors. He said he did not receive any special treatment for his $77,000 loan in 2004.

Both lawmakers said they have never performed any legislative favors for Countrywide. 

The loans came to light after Issa handed Bank of America a pair of subpoenas shortly after becoming committee chairman in the beginning of 2011. The bank purchased Countrywide in 2008, and has since had to pay $8.5 billion to settle investors' claims that it and Countrywide sold low-quality mortgages that failed when the housing market collapsed.

The subpoenas have yielded roughly 100,000 documents and, according to Issa, they reveal that Countrywide used its VIP program to "build relationships with government officials and others positioned to advance Countrywide's business interests." Other questionable recipients include up to 173 employees of Fannie Mae and Freddie Mac, including some in "senior management positions."

Gallegly announced earlier this month that he would not seek reelection in 2012.