SEC files charges against Countrywide exec:
Angelo R. Mozilo, the self-made man from the Bronx who built Countrywide Financial into the nation’s largest mortgage lender before the credit squeeze hit, has been charged with securities fraud and insider trading in a civil suit brought by the Securities and Exchange Commission.
Citing e-mail messages in which Mr. Mozilo referred to Countrywide loan products as “toxic” and “poison,” S.E.C. officials said that he had misled investors about growing risks in the company’s lending practices from 2005 through 2007. During this time he also generated $140 million in profits by selling stock in the company, the S.E.C. said.
“This is the tale of two companies,” said Robert Khuzami, enforcement director at the S.E.C. “Countrywide portrayed itself as underwriting mainly prime-quality mortgages, using high underwriting standards. But concealed from shareholders was the true Countrywide, an increasingly reckless lender assuming greater and greater risk.”
The real question is how much of what went on here was the norm.
Napoleon
On the plus side if his cell mates stage a night time break out they will not need a flashlight but can find their way out from the glow of his tan.
cleek
i’m gonna go with the norm.
unlike Minnesota.
SpotWeld
Does it really matter if his specific actions were the norm or not?
It seems to really matter that his actions should have been obvious to the majority of the people in positions of power within the industry and they did nothing to self-regulate.
In other words, a key lesson learned from this whole event is that the interest of the customer (as opposed to profit though herd behavior) is not a driving force towards industry self-regulation.
Greenspan’s theory of how the market works has been proven utterly wrong wrong wrong.
DougJ
First J-Lo, then Sotomayor, then Mozilo.
Can we really trust people from the Bronx in positions of authority? And does anyone know which syllable Mozilo emphasizes when he says his name?
TR
Wasn’t Mozilo one of the evil monsters from the Godzilla films?
NonyNony
@SpotWeld:
Greenspan’s theory of how the market works was laughable on its face. He made the classic error of mistaking his model for reality. His model abstracted all the people out and left behind only “corporations”, “shareholders” and “consumers”. He forgot to include “greedy bastards who care nothing for the actual corporations and will do whatever it takes to make sure they get theirs no matter how much it screws over everyone else”.
It has all the marks of someone who has never actually worked for a large publicly traded company to see how these hired-gun CEOs actually work. Greenspan may have known a few CEOs socially, but there’s nothing like actually working for one of the bastards to make it patently obvious that they care nothing for the company itself, except in as much as they need the company around to pay for their own gravy train and make sure their stock options stay profitable.
Steeplejack
@TR:
Big bug eyes, mouth pincers and a dorsal fin? Yeah, I thought Rodan kicked his ass. Let me see if I can find my copy of the definitive reference Japanese Insect Fear Films and the Dread of Nuclear Annihilation, 1950-1970. It’s around here somewhere.
Karmakin
@NonyNony: To be honest, where the whole thing goes off the rails and why we won’t and probably can’t do anything about this whole mess is that the economics field as a whole is completely incapable of grasping that moral hazard applies MORE SO to those in positions of power, instead of virtually non-existent
The Other Steve
Mozilo stared as one of the Oompa Loompa’s in Charlie and the Chocolate Factory. Sheesh, I thought that was obvious.
Jager
One of my neighbors belongs to the same Catholic Parish as Mozilo, he was a twice a year Catholic for years…he’s going to Mass 2-3 times a week, now. Asshole!
Michael
For sheer awesomeness, nothing beats King Guidra and his 3 heads.
Travis
John –
The answer is that a great deal of this was the norm. It was well known within the industry that there were unsustainable pressures from CDOs and CDSs that the regulators were choosing to ignore. I attended a seminar in 1996 at the bank I worked for, and left with my mind reeling. It was like finding out you were sailing on the Titanic — and I had already believed that there was a massive housing bubble underway. This was a low-level seminar for IT nerds like myself, not some top-secret meeting of the C-level executives.
So the question is not so much what was the norm, but how can we make this never fucking happen again. The internal risk folks were (and still are) shut out of making important decisions. The regulators were befuddled, powerless, and overwhelmed. The allegedly neutral third-party raters were financially and legally threatened by their own business arrangements.
And inside each of these businesses were people like Mozilo who knew about the problem and kept their mouth shut. For the common good, this disconnect between the public and private needs to be brutally punished. Sarbanes-Oxley was not enough, even though it will help prosecute this motherfucker. There has to be major attitudinal changes in people where they realize they personally can be threatened if they do something so stupid and venal with the public trust. I hope they put Mozilo in jail and force a disgorgement of profits over the last several years. That is the kind of action that will wake up the C-level executives.
chrome agnomen
@dougj: first j-lo…
no, first colin powell.
asiangrrlMN
@cleek: Thanks. Rub it in. John, that’s not really a question, is it? Because I think the answer is pretty self-evident. This kind of thing happened all the time. We need some real consequences for it–not just a hefty fine. I don’t know who mentioned hard time for white collar crimes, but I am beginning to think the same way.