FISHING TRIPS IN TOXIC WATERS
Mortgage Pioneer Accused Of Fraud
Former Countrywide CEO Sued by SEC Over Risky Lending
By Zachary A. Goldfarb
Washington Post Staff Writer
Friday, June 5, 2009
The Securities and Exchange Commission yesterday charged former Countrywide chief Angelo R. Mozilo, who ran the nation’s largest subprime mortgage lender, with fraud, making him the most prominent executive accused of illegality in connection with the financial crisis.
Mozilo was one of the masters of the housing boom, steering Countrywide as it moved into new, perilous markets in pursuit of profit, making risky loans to borrowers with checkered credit histories or without proof of income or employment. By the first half of 2007, the company funded about one of every five home loans, and mortgage industry observers say its reach in the Washington region was deep.
. . . Mozilo in private e-mails referred to loans the company were making as “toxic” and acknowledged the firm was “flying blind,” the SEC alleged . . . Mozilo wrote, “In all my years in the business I have never seen a more toxic product.”
In a Sept. 26, 2006 e-mail, addressing a particularly risky type of adjustable-rate mortgage, Mozilo said, “We have no way, with any reasonable certainty, to assess the real risk of holding these loans on our balance sheet.”
Any successful fishing-trip begins with a visit to the tackle shop, where (in this case) relatively minor executives are given the option of going to jail all by themselves or being hooked through the tail to bring down the big boys. Fishing is more often about trophies than dinner.
So, that’s why it takes a while to announce the fact that a bobber has just been pulled under and (with any luck) there’s a fish, rather than a boot, at the other end of the line.
There are a hell of a lot of executives running for cover these days and telling each other that guy in the hip-boots isn’t actually after them. You might even say there are schools of them–Harvard, Princeton, University of Chicago . . .