When we have a major economic dislocation, there is always some aspect of criminal behavior involved. As a result, the governmental authorities look for specific companies and individuals to use as scapegoats for all of the ills of the economy. After the tech bubble crashed in 2000, Enron and Ken Lay quickly became the face of corporate malfeasance. Now, it is Angelo Mozilo and Countrywide Financial.
“Securities regulators have stepped up their investigation of mortgage giant Countrywide Financial Corp. and its former chief executive, Angelo R. Mozilo.
Bank of America Corp., which acquired Calabasas-based Countrywide last month, said in a regulatory filing Thursday that the Securities and Exchange Commission was conducting a formal inquiry of the lender and that it had responded to subpoenas from the federal agency.”
- LA Times, 8 Aug 2008
Why is Countrywide a target? Let’s go to the videotape:
- Mortgage Fraud. “Countrywide also faces probes by the FBI and several states looking primarily into whether the company engaged in improper lending practices, including making loans to people who did not have the ability to repay.”
- Unseemly profiteering. “The SEC began investigating Mozilo after a Los Angeles Times report in September detailed his sale of $145 million in Countrywide stock in late 2006 and 2007 via automatic trading plans.”
Basically, the LA Times is showing that Countrywide represents the most obvious case of mortgage fraud, predatory lending, and other ills that caused millions to take on loans they would otherwise not have. As mortgage lending is at the core of the problems facing the U.S. economy, doing a few Countrywide perp walks would be a coup in any politician’s book.
But, then there’s Angelo Mozilo. He is a man who made hundreds of millions of dollars while the mortgage market fell apart and people lost their homes, dreams, and life savings. The U.S. government, the state governments and many an Attorney General will do everything they can to be the first to arrest Mozilo to parade around before the U.S. public. This is what politicians do — Attornies Generals are politicians too.
And, remember, Mozilo was also the originator of IndyMac, which spectacularly went bust this past month.
Why Bank of America took on this kind of open-ended legal risk is beyond me. But, one thing is for sure: we will see convictions at Countrywide.