Mozilo Goes To The Woodshed (But Not Much Farther)

Countrywde Financial CEO and Orange One Angelo Mozilo stepped in front of a House committee last week examining outrageous executive compensation at a time when companies are hemorraghing billions. (The New York Times coverage here.)

 As expected, not much came of it; the hearing was a dog and pony show, and the government doesn't have any kind of control over what private companies pay their employees anyway. Still, it was a populist feel-good show and fun to watch these dirtbags squirm under the bright lights.

California Democrat Henry Waxman headed the hearing. Here's a quote from Waxman's memo issued prior to the hearing

"While Countrywide, Merrill Lynch, and Citigroup prospered, Mr. Mozilo, Mr. O'Neal, and Mr. Prince received lucrative pay packages. During the five-year period from January 2002 through December 2006, the stock of Countrywide, Merrill Lynch, and Citigroup appreciated, and the three CEOs collectively received more than $460 million in compensation

"Any alignment between the compensation of the CEOs and their shareholders' interests appears to breakdown in 2007, however. Despite steep declines in the performance and stock price of the three companies resulting from the mortgage crisis, Mr. Mozilo, Mr. O'Neal, and Mr. Prince continued to be well rewarded: Mr. Mozilo received over $120 million in compensation and sales of Countrywide stock; Mr. O'Neal was allowed to leave Merrill Lynch with a $161 million retirement package; and Mr. Prince was awarded a $10 million bonus, $28 million in unvested stock and options, and $1.5 million in annual perquisites upon his departure from Citigroup.

"Collectively, the companies run by Mr. Mozilo, Mr. O'Neal, and Mr. Prince lost more than $20 billion in the last two quarters of 2007 alone as a result of investments in subprime and other risky mortgages."

Best Waxman quote from the hearing (to all three CEOs): “It seems like everyone is hurting except for you.” 

Mozilo's most oft-quoted comment (taken from his prepared statement): "As our company did well, I did well."

That's fair and American - it's the way capitalism is supposed to work. What my gripe with Mozilo has always been is that the ARMs and HELOCs his company spread so virulently were done so with all the responsibility of someone giving whiskey and car keys to teenagers. 

"Adjustable rate mortgages had been popular with both borrowers and lenders for many years," the Orange One replied. "From my perspective, then, the issue is not so much the products, but the housing market. It bears noting that no one predicted the severity and force of the housing market downturn that followed."

It was the market's fault? It was the way the products were sold (and if you've ever heard a Countrywide HELOC pitch, you know what I mean) and bought (people didn't read the ARM fine print - their bad, true, but, again, if you've bought property, you've seen that mountain of paper at the escrow office).

He built the nation's biggest mortgage company but never saw this coming? That's like Tiger Woods not being able to figure out how to play a par one hole.

Countrywide shares are down 86 percent in the past 52 weeks.

The Times reported Saturday that the FBI is investigating whether officials at Countrywide offered misleading information about the lender's financial condition and loans in security filings.  You can thumb your nose at Congress, but the FBI is a whole different ball of wax.

Scott Seckel, Editorial Director NEXZUS Publishing

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