Friday, December 28, 2012

Matt Taibbi; Pot, Kettle, Black Award Winner

The Rolling Stone correspondent thinks it's a big deal that former Countrywide Financial CEO Angelo Mozillo said, in a legal proceeding, that he didn't know what 'verified income' meant.

Deposed in the landmark lawsuit between the monoline insurer MBIA and Countrywide/Bank of America, Mozilo professed not to know the difference between "verified" income and "stated" income. He also made some incredible remarks regarding his notorious "Friends of Angelo" lending program, in which, among others, political figures like North Dakota Senator Kent Conrad and Connecticut Senator Chris Dodd received Countrywide mortgages on highly advantageous terms just because they were tight with the CEO.
As chief of Countrywide, Mozilo headed the single most corrupt subprime mortgage lender in America during the period preceding the crisis. Charged with mass fraud and headed for trial in October of 2010, Mozilo and the SEC ultimately settled four days before opening arguments were set to begin in Los Angeles. Ultimately, Mozilo got away with no jail time, paying a $67.5 million settlement....
If we're going to mention Friends of Angelo, we'd think that they ought to include the ones most well positioned to really take advantage of that friendship; former HUD Secretaries, Henry Cisneros (speaking of someone who plead guilty to crimes, but avoided a prison sentence) and the current Governor of New York, Andrew Cuomo.

It was Cisneros who pressured Mozillo (and other Mortgage Bankers' Assn members) into lowering Countrywide's lending standards in the first place, all the way back in the early 1990s.  He did it by threatening to have the Community Reinvestment Act of 1977 amended to include the lenders such as Countrywide, unless they voluntarily signed up for his Best Practices Initiative (the CRA in all but name).  At the time, Democrats controlled the Presidency and both houses of congress.

Which is an all too typical political tactic known as 'their hearts and minds will follow if you have them by the...'.  Cisneros resigned from HUD in 1997, and (surprise, surprise) went into the real estate business.  He formed a development company and partnered with KB Homes.  In 2001 he became a board member of...Countrywide Financial!

According to SEC records, Cisneros earned well over $5 million at Countrywide alone, before he resigned in 2007 after that company announced a loss of over $1 billion.  Largely due to policies forced upon Countrywide in the prior decade by HUD Sec'y Cisneros, and his successor Andrew Cuomo.
Cuomo had continued in the same fashion as Cisneros, using HUD to pressure Fannie Mae and Freddie Mac into buying loans originated by Countrywide. Also increasing the limit on FHA loans made to risky borrowers.  Without that pressure from Cisneros and Cuomo it is unlikely the housing bubble would have developed in the first place.

Cuomos ambitions lay in politics, rather than as Cisneros' in real estate; he also used HUD's travel budget to allow himself to constantly visit New York on publicity stunts during his HUD tenure.  That perfectly suited his long range plan to run for the governorship in that state.

Not that the shenanigans of these two excuse the following mischief by George W. Bush's HUD Sec'y, Alphonso Jackson, who also was a good Friend of Angelo.  Funny that Matt Taibbi couldn't find space to mention any of these names in his article.

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