Let’s be clear: we are fans of going after bank execs who bear significant responsibility for damage to borrowers and the economy, rather than just the footsoldiers. We also prefer criminal prosecutions. But in this era when the elites just don’t think of white collar crime as criminal, at least if performed by people who have big titles are large institutions, we have to highlight whatever progress we do see on the “get tough with the bad guys” front.
One deserving target is Angelo Mozilo, head of Countrywide, the biggest and most efficient subprime originator. Among other things, it had a polished machine of a call center whose tricks included calling borrowers six months into a loan and scaring them into refinancing it (with more fees) by telling them falsely that their teaser rate was about to reset to a dramatically higher level. And Countrywide, along with other major subprime originators, targeted minority borrowers. One of the reasons that Rust Belt cities like Cleveland and Detroit were hard-hit in the bust was that these mortgage boiler rooms would call older black borrowers with modest homes with fully or largely paid off mortgages and press them to take out a home equity line of credit. These deals sounded too good to be true, and of course, they did prove to be too good to be true.
So we should all cheer that the Feds are having a second go at Mozilo, right? Bloomberg broke the story yesterday afternoon:
Countrywide Financial Corp. co-founder Angelo Mozilo hasn’t entirely escaped prosecutors’ wrath for his company’s risky lending. A U.S. government task force wielding an innovative legal strategy plans to bring a civil case against him over the excesses of the subprime-mortgage boom.
The last-ditch effort comes three years after the Justice Department abandoned a criminal probe of Mozilo…Relying on the same anti-fraud law, the Financial Institutions Reform, Recovery and Enforcement Act, the U.S. attorney’s office in Los Angeles is preparing to sue Mozilo and as many as 10 other former Countrywide employees, according to two people with knowledge of the matter. The case may be helped along by an imminent U.S. settlement with Bank of America Corp., which acquired Countrywide in 2008. That resolution may come as soon as today with Charlotte, North Carolina-based Bank of America expected to pay as much as $17 billion and to acknowledge improper mortgage practices at Countrywide….
Until now, the harshest penalty imposed on Mozilo has been a $67.5 million accord with the U.S. Securities and Exchange Commission from 2010 to resolve allegations that he misled Countrywide investors. He earned $535 million from 1999 to 2008, according to compensation-research firm Equilar Inc. The size of the sanction in the SEC case, in which Mozilo didn’t admit or deny wrongdoing, compared with his pay has fueled criticism from lawmakers and public-interest groups that executives walked away from the housing bust enriched and mostly unscathed.
FIRREA provides for substantial penalties for defrauding a financial institution. Moreover, according to Jones Day, five types of misconduct merely require proving it happened and an additional four require proving that the sanctioned behavior was “affecting a federally insured financial institution.” So in layperson terms, FIRREA allows a way to nail bank executives and producers for looting their firms.
So why aren’t we more excited about this? While Mozilo is certainly a deserving target, I remain underwhelmed until we see the DoJ targeting the senior ranks of other major subprime originators, including Indymac, New Century, WaMu, and of course, the major banks, since all (save JP Morgan, which was late to enter and then not willing to pay up for “talent” and thus dodged that bullet) had moderate to large subprime operations. Mozilo is the most visible face of the subprime business, and also has the advantage of no longer being in the banking industry. So he has tremendous headline value without threatening the credibility of the banking industry generally (not that it has any, but folks who live in the New York to Washington corridor seem to think otherwise). So while we might hope for more Countrywide-type suits, I’m not holding my breath.
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I was buying puts of Counrtywide back in the day. I always thought Mozilla had a streak of pessimism in him, and it occasionally came out in his comments.
He has never struck me as the best candidate for prosecution, just one of the more visible ones.
Yves, I take your point, but at this point in time – I’ll take what I can get as regards justice. By all accounts, Angelo should burn in hell, so yeah, I’m cheering DOJ on.
You’ve just demonstrated how the con of going after an isolated headline baddie works. The Administration now has you approving of doing way too little way too late.
When running a successful three-card monte hustle, it’s important to occasionally let a mark win one. It keeps everyone’s hopes alive for a few more rounds of fleecing.
Since Team Obama failed to go after the banksters, a more complete historical narrative on what happened is being swept under the rug. As a result of this immense gross failure Faux Nieuws & other race baiters can capitalize on black misfortunes in Detroit and elsewhere who fell prey to the likes of Mozillo and can sum up blacks failures as their own and government should not lift a finger to help them.
Because Obama did not put the predator banksters behind bars he helped swell the ranks of the poor, raised poverty levels and fed the flames of ugly racism. There is no recourse in the injustice system to get justice.
Deep truth in there, John. His outcomes are often perverse to expectations.
Another was assuming that because he had a Muslim stepfather, he would have a deeper and more compassionate understanding of the Muslim world.
“Turns out I’m really good at killing people.” – B. Obama
Don’t forget that this weasal had a little help in his 2010 settlement with SEC from B of A (Countrywide).
“Mr. Mozilo and his colleagues neither admitted nor denied the government’s charges. The payment by Mr. Mozilo will consist of $22.5 million in civil penalties and $45 million in disgorged stock profits. Mr. Sambol agreed to pay $520,000 in penalties and $5 million in disgorgement. Countrywide is paying for all of Mr. Sambol’s disgorged funds; Bank of America has been paying Mr. Mozilo’s legal fees, and the $20 million Countrywide is paying on his behalf applies to stock profits he was forced to give up.”
http://www.nytimes.com/2010/10/16/business/16countrywide.html?pagewanted=all&_r=0
Question: My question is when the government “settles” or “sues and wins” these cases, who gets the money? Are the victims ever compensated even a little, i.e., who wins/prevails?
I’ll settle for the man’s head on a silver-plated platter. But the reference to WAMU – just where is Killinger in all this mess? He rode WAMU to the hilt, buying Long Beach Mortgage (a once-prolific purveyor of crap loans) in the mid-2000s.
I’ve not looked, but would venture his take from WAMU (pay, bonus, stock incentives) would mirror that of Mozilo during the time frame of 1999 – 2008.
Is Deval “Ameriquest” Patrick next?