Remembering Countrywide

Fresh off a recent post on foreclosures, I was doing a final read of the Wall Street Journal when I came on their article about Bank of America's $40 billion mistake in acquiring Countrywide Financial. 

Here is an excerpt that speaks to the issue of dealing with delinquent mortgages and eventual foreclosures.  It is a mind boggling mental picture: "Countrywide saddled Bank of America with hundreds of thousands of delinquent borrowers, thrust it into the middle of a foreclosure-paperwork scandal and exposed the bank to countless lawsuits from mortgage-bond investors and insurers. The number of people handling poor-performing real-estate loans for Bank of America ballooned from 5,000 at the time of the Countrywide purchase to 50,000. Those people occupy at least 4.5 million square feet of office space around the country, the equivalent of 78 football fields."

What's really appalling is that all those horrible collectors and others occupying that 4.5 million square feet are dealing with real people whose lives are being turned upside down.  I understand that many of the borrowers were gaming the system too.  But none of this should have happened at this scale because Countrwide's underwriting should have been reined in by regulators, and it should never have been acquired by any kind of rational board of directors.

First question: if Raj Rajaratnam has paid millions in clawed back profits from a relatively puny insider trading scheme and been banned from the securities industry while spending eleven years in prison, why on earth is Angelo Mozillo not in the Federal pen on multiple life sentences? I am among millions of Americans who are asking the same question about Mozillo.


Finally, here's a laughable quote from Ken Lewis the former CEO of Bank of America:  "The Merrill Lynch and Countrywide integrations are on track and returning value already." (from Wikipedia) His 2007 compensation was $20 million.  Shareholders wanted earnings growth and management rewarded themselves for delivering a chimera instead. 

Bank of America is the best performing stock in the Standard and Poor's 500 year-to-date!  We talk about kleptocracies in a number of other countries, some of which claim decocratic processes.  We need to have a serious look at the virus of a crony capitalism which is thriving in our own markets, untouched by any meaningful reform.