We hear it a lot these days, the Dante Alighieri quote that declares that the hottest places in hell are reserved for those who in times of great moral crisis maintain their neutrality.
And of course we’re all down with that, but… doesn’t it seem right there should be some fiery little side-pit for the likes of an arrogant piece of work like Angelo Mozilo?
Mozilo, of course, is the CEO of Countrywide Financial, the mortgage lending giant that gorged for years on sub-prime loans — read: loans loaded with points and extra fees and often double-digit interest rates — before the present meltdown may yet drag the entire economy into the dumper.
The 70-year-old Mozilo is considered the point-man of Countrywide’s conversion from a more conventional lender to a majority subprime loan vendor.
In 2007, Countrywide lost $704 million and laid off 11,000 employees. Mozilo collected $132 million in salary and cashed-out stock options.
Borrowers, stockholders, and former employees all got so angry, they stormed Countrywide and rode Mozilo out on a rail.
Ha ha — not really! Of course they didn’t!
Mozilo’s fine, still safely ensconced there at Countrywide.
In fact, the company borrowed $51.1 billion form the Federal Home Loan Bank System, likely using their junk loans as part of the collateral — New York Sen. Charles Schumer is worried about that and wants the feds to look into it. Countrywide also got a $2-billion infusion from Bank of America.
And last week Mozilo was evidently feeling fine enough to write a snotty response to an email from a customer who faces losing his home of 16 years because of a bad loan. Daniel Bailey Jr. sent a plea to Countrywide asking to restructure his adjustable-rate mortgage loan. Bailey said he didn’t understand the terms when he signed for it.
Countrywide gets so many such emails, by the way, it bogs down its communications systems. Bailey had sent the email to 19 Countrywide people besides Mozilo.
Mozilo’s tender reaction to the beleaguered borrower’s request:
This is unbelievable. Most of these letters now have the same wording. Obviously they are being counseled by some other person or by the internet. Disgusting.
The nerve of the little people to all get counseling when they are threatened with losing their homes.
After his huffy observation, Mozilo made a dreaded e-etiquette mistake. He hit “reply” instead of “forward” and sent his rude remarks back to Bailey, the borrower, instead of the Countrywide staff for whom it was intended.
Mozilo’s language doesn’t quite rise to the level of elegance of Dick Cheney’s “go-fuck-yourself” advice to Sen. Patrick Leahy, but does provide a sense of what kind of help a borrower can expect from Countrywide.
The company quickly issued a statement — Mozilo and Countrywide regret any misunderstanding blah blah of course intend to help borrowers blah blah blah.
Misunderstanding? Really? Hmm — seems Mozilo said exactly what he meant.
In the Internet chatter about the incident, bloggers pointed out that home loans represent hundreds of thousands in credit and the borrower is responsible to understand the terms.
Okay, I can kind of see that. But here’s the other thing — you want to trust your loan brokers and bankers like you would want to trust your car mechanic — you want one who will honestly tell you what needs fixing and what it costs to do it. Those mechanics get repeat business, depend upon it.
But the whole subprime frenzy was about the opposite ethic. Mortgage lenders like Countrywide and New Century Financial Corporation and Ameriquest concocted and aggressively marketed what are called “exotic” loan products.
The latter two companies, by the way, went bankrupt in the financial sense last year; morally, apparently much earlier.
One very common “exotic” loan: the “2-28.” That was a loan with a low introductory interest rate for two years before it adjusted — sharply upward — for the next 28 years (!). Lenders often deployed teams of brokers that used boiler room telemarketing techniques to sell 2-28’s and other such exotic loan products.
The housing market was hot, borrowers figured they could make the payments. Others didn’t really get the ramifications of the terms they signed onto.
Mortgage companies were insulated from the danger of default because they passed the loans along to Wall Street firms with household names — Standard & Poor’s, Moody’s, and Bear Stearns – that supplied a triple-A rating to exotic loans bundled with conventional ones into securities for sale to investors.
It was big, big money — a $1.5-trillion global market.
But when the housing market started to tank and borrowers began defaulting, Wall Street said hey lenders, take your junk loans back, and the slide began — and we’re all sliding still.
You know that sorry tale. For sure Angelo Mozilo does. Minus any “sorry.”
A few days ago Senate Democrats and Republicans compromised on a bill that would allow the Federal Housing Administration to insure $300 billion in new loans for borrowers who may be able to re-fi their present funny-money loans into something manageable should the mortgage bankers be willing to write them down. The Senate takes it up this week.
The House passed a similar bill on May 8. The Bush administration threatened to veto it.
Even if it goes through, the legislation would help out 500,000 borrowers while the nonprofit Center for Responsible Lending tells us some 20,000 a week go belly up and they expect at least 2 million.
The United States, of course, is not made of money, except when it comes to pre-emptive wars that could last 100 years and like that. But still, the $300 billion figure seems a little thin. Maybe that only speaks to the magnitude of the disaster.
The Center for Responsible Lending is conducting an investigation into Countrywide’s marketing practices and their role in the overall debacle — should be juicy.
Fat profits fueled the predatory lending at the heart of the mortgage meltdown. The lenders, now somewhat chastened, have tightened lending standards and re-instituted such seemingly obvious steps as actually verifying someone’s income.
But predatory financial practices mostly go on, despite dogged, dug-in, long-term fights against it by dedicated consumer advocates. Payday loans, income tax refund advance loans and even sub-prime mortgages are still alive and well, disproportionately concentrated in low-income neighborhoods.
The transfer of wealth from poor communities through predatory lending practices amounts to $9.1 billion annually, according to a study by the Durham, North Carolina-based Self-Help Credit Union.
And a whole sector of economic overlords sees it as good business to maximize that revenue stream.
Lord knows there are many good policy people and grass-roots groups who have been waiting for the opening to enact large-scale reform. Maybe a power shift in Washington will open the door, although Wall Street’s $way on Capitol Hill is pretty powerful.
Back to Mr. Mozilo. While he may now be in fine enough form to send mean emails about his customers, there could be trouble ahead for him. The Securities and Exchange Commission is investigating him related to his timing on those stock options he cashed out before stock values plunged but while Countrywide was headed for the rocks.
Congressman Henry Waxman, a Los Angeles Democrat, explains it nicely here in this YouTube video, where he has Mozilo on the griddle before a congressional subcommittee.
And last week a federal judge ruled that a shareholder lawsuit against Mozilo and three other Countrywide executives can go forward.
Dante is far beyond reordering his cosmology at the advice of a 21st- century whippersnapper, and why would he anyway? So the hottest spots in his inferno can and will remain as is.
We mortals wait with interest as temporal justice plays out.