WASHINGTON — Two top Senate Democrats were cleared on Friday of any wrongdoing when they received loans through a special VIP program run by Countrywide Financial Corp., though both should have exercised better judgment, Senate investigators said.

The bipartisan Senate Select Committee on Ethics said it found "no credible evidence" that either Sen. Christopher Dodd of Connecticut or Sen. Kent Conrad of North Dakota knowingly sought out a special loan or treatment because of their standing.

But in both cases, letters sent Friday from the panel to the two senators said, the lawmakers should have questioned why they were being put in the "Friends of Angelo" VIP program at Countrywide Financial, so named for former Chief Executive Angelo Mozilo.

"Once you became aware that your loans were in fact being handled through a program with the name 'V.I.P.' that should have raised red flags for you," the panel said in the letter to Dodd, chairman of the Senate Banking Committee.

The panel said it reached the conclusion that the lawmakers didn't improperly accept a gift or seek out preferential treatment after reviewing more than 18,000 pages of documents from Countrywide, the firm's former employees and personal information provided by both Senators.

The Center for Responsibility and Ethics In Washington, which filed the complaint against Dodd and Conrad, questioned the decision to absolve the two lawmakers since investigators found that discounts were part of the Countrywide program.

"As is its practice, the Senate Ethics Committee has cleared the senators of any wrongdoing," CREW Executive Director Melanie Sloan said in a statement.

Both Dodd and Conrad acknowledged the situation should have been handled better.

"While I should have shown more vigilance in the appearance of these transactions, the committee has concluded I did nothing unethical, and that is the truth," Conrad, chairman of the Senate Budget Committee, said in a statement released by his office.

The Countrywide issue has been a looming problem for Dodd, afive-term senator who could face his toughest reelection battle yet in 2010. His popularity has taken a beating in his home state over the Countrywide loans, as well as the appearance he received a favorable deal on a vacation cottage in Ireland.

Dodd is trailing former Republican Congressman Rob Simmons by 9 percentage points, according to a recent Quinnipiac University poll. Only 35% of those surveyed believe Dodd is honest and trustworthy, the poll released July 23 found.

In a statement released by his office, Dodd acknowledged his missteps on the loan issue and the damage it has done to his public standing in the state.

"I hope that today's dismissal will go a long way towards restoring the bond of trust and confidence that I've worked long and hard to build with the people of our state," Dodd said.

Despite the decision of the ethics panel, Republicans appeared unlikely to let the issue disappear. Brian Walsh, a spokesman for the National Republican Senatorial Committee, said it's "one issue down, but many more still unanswered" for Dodd.

"There's no doubt Chris Dodd has a long way to go in restoring voters' trust in his leadership and ethics," Walsh said.

In addition to clearing the two senators, the ethics panel revealed additional information about the Countrywide program. The investigation revealed that the Friends of Angelo unit handled billions of dollars of loans from late 2002 through 2004 for a large number of individuals, many of whom had never even met Mozilo.

Additionally, the review found that the discounts offered to people included in the program were not the best deals available at Countrywide or in the broader marketplace, though VIPs "were often offered quicker, more efficient loan processing and some discounts."

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