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One of America’s top mortgage tycoons, Angelo Mozilo, has been charged with fraud and insider dealing for allegedly lying to investors about a toxic build-up of billions of dollars in reckless loans at his Countrywide Financial homeloans empire.
The Securities and Exchange Commission launched a civil prosecution against Mozilo for making $140m in profit by selling Countrywide stock in 2006 and 2007 while concealing a looming deterioration in the business’s prospects from shareholders.
At the peak of America’s property boom, Countrywide was the nation’s biggest mortgage provider, servicing one in seven US homeloans. But the firm suffered catastrophic losses in the credit crunch and was rescued from possible bankruptcy by Bank of America last year…
“Countrywide portrayed itself as underwriting mainly prime quality mortgages using high underwriting standards,” said Robert Khuzami. “But concealed from shareholders was the true Countrywide, an increasingly reckless lender assuming greater and greater risk…”
The charges are the most prominent government prosecution to date arising from America’s meltdown in sub-prime mortgages. Mozilo has been widely vilified as the “sub-prime king”, accused by unions and politicians of exploiting customers with predatory mortgages. Charles Schumer, a prominent Democratic senator for New York, recently suggested that Mozilo should be “boiled in oil – figuratively”.
I wouldn’t suggest anything as mean as boiling in oil. Now, the guillotine – that’s a different story.
As good a time as any to reiterate what I saw leading up to this meltdown. State and federal governments abdicated their responsibility for oversight – allowing unlicensed, unregulated mortgages to be sold from storefronts.
Yes, the big banks and financial firms jumped on top of sub-prime mortgages with their own special greed; but, none of this could have happened without the collusion of sleazy politicians at every level of American governance.