The New York Times tries to sound tough in its editorial on the sweetheart deals two Democratic Senators received from Countrywide Mortgage, but the Times falls far short of the real issue.  While Democrats like Barack Obama demonized Countrywide for its role in the subprime collapse, Democrats like Chris Dodd and Kent Conrad — charged with overseeing these markets — got preferential treatment from Countrywide instead.  That makes the issue more than just a lack of sensitivity, the sternest scolding the Times can apparently muster:

Time and again, the Senate is bedeviled by its own clubbiness, its lost sensitivity to how ordinary people live their lives. So it is with Christopher Dodd and Kent Conrad, who turned up on the “Friends of Angelo” V.I.P. list at Countrywide Financial Corporation.

Countrywide, a home-loan powerhouse, figures prominently in the subprime mortgage crisis, which has put hundreds of thousands of Americans at risk of losing their homes. The revelations about Mr. Dodd, Democrat of Connecticut, and Mr. Conrad, Democrat of North Dakota, are particularly troubling since the two senators are principals in trying to pass emergency legislation to address the damage from the mortgage crisis.

That’s not the really troubling part of the story, and the Times knows it.  Dodd chairs the Senate Banking Committee, and Conrad sits on the Finance Committee.  Both have oversight in banking and credit issues, especially Dodd.  Accepting gifts from actors in their fields of regulation isn’t just insensitivity, it’s a clear conflict of interest — and looks a lot like corruption.

Their work on a bailout package for lenders amplifies that appearance.  When first floated, I noted that the bill assisted the lenders that made the bad decisions while only offering “counseling” to homeowners who stood to lose everything.  Now we know why; lenders like Countrywide had greased the wheels earlier with below-market loans that saved these Senators tens of thousands of dollars.

This goes way beyond “sensitivity”.  It hits at the heart of the entire regulatory mechanism.  If the elected officials we put in charge of the henhouse turn out to be the foxes, then the burdensome and costly bureaucracies we build to regulate these industries are useless.

The Times is right in one respect: the Senate Ethics Committee isn’t likely to take any significant action against Conrad or Dodd, the latter of whom has the more egregious fault in this case.  Neither will Dodd’s constituents in Connecticut.  Conrad may be lucky that he won’t stand for re-election for another four years, because he would almost certainly lose if he had to run this year in North Dakota after this scandal.  And as long as no consequences result from this kind of slimy double-dealing, it will continue to occur.