MOST PEOPLE WILL AGREE THAT the proliferation of easy lending standards in the early 2000s fueled a historic boom in home values followed by the greatest crash since the Great Depression. As subprime lending gathered steam in the early 2000s, Countrywide Financial became the nation’s largest home loan lender, offering ever-expanding and easier-to-qualify mortgages. In a deal brokered by then-Treasury Secretary Timothy Geithner, Bank of America bought Countrywide in a last-ditch effort to save the troubled company — and with it, many believe, the nation’s economy. As we all know now, that effort failed and the economy was crushed.
At the heart of Countrywide was founder and CEO Angelo Mozilo. Bank of America agreed to purchase Countrywide in January 2008. Mozilo, who received more than $500 million in compensation from 1999 to 2008, in March 2008 faced an angry congressional committee investigating CEO compensation at several financial institutions, including the ousted CEOs of Merrill Lynch and Citigroup. Two months later in a Bloomberg interview, Democratic Sen. Charles Shumer of New York stated that Countrywide “will come to symbolize what went wrong with housing.”
Many, myself included, asked why Mozilo did not end up in jail.
The statute of limitations has run its course and the government no longer can file criminal charges. However, recent press accounts indicate that a special government task force and the U.S. Attorney’s Office in Los Angeles are preparing to file a civil suit against Mozilo and several of his top lieutenants under the same fraud statutes that have been used to wrestle billions from Wall Street Banks involved in the mortgage crisis. Bank of America agreed to a $16 billion settlement in a suit filed under the same statutes to settle claims mostly arising from loans it inherited in the Countrywide purchase.
Most amazing to me is the sheer gall of Mozilo, who has recently been interviewed by numerous news outlets. If ever there was a poster boy for the out-of-touch uber-rich, this guy is the perfect candidate. In the many interviews there is one message that is clear: He doesn’t understand why he is being made out to be the villain. He doesn’t believe he did anything wrong and he will not admit the role his company played in the biggest economic disaster since the Depression.
As we wind our way out of the Great Recession, we know that many Americans will never fully recover. At the very least, our government must do something to bring the biggest culprits to some form of judgment.
Whenever I discuss legal matters, my compliance folks get a little nervous. So, just to make sure there is no misunderstanding, I am not an attorney and any references to the law or legal items mentioned in this column should not be construed as factual legal information.
Guy Benjamin (CAL BRE License #01014834, NMLS 887909) writes a weekly column for The Herald, offering general information on real estate matters. As it is impossible to address all possibilities and variations, he will try to answer individual questions by readers who contact him at 707-246-0949 or guyb@fairwaymc.com.
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