Adding insult to outrage, former executives of the nefarious
Countrywide Financial, who should be involved in a RICO suit for conspiracy to
defraud based on thousands of knowingly risky loans they made to tens of
thousands of Americans, are now poising themselves to make more millions from
the home mortgage mess they helped create, reports the New
A dirty dozen or so of the former giant Countrywide are now
lining up to scoop up millions from the mortgage mess. No less than Stanford L.
Kurland, Countrywide�s former president, and his gang of former executives are
buying up delinquent home mortgages that the government paid for to take over
from other failed banks. They�re offering pennies on the dollar, which still
guarantees them a piece of what they collect.
This is the opposite of double jeopardy, being tried twice
for the same crime. This is committing the same crime twice and getting away with
it. To me, both are illegal. But we live in a world of financial precedents
these days, in other words, anything goes.
John Lawrence, head of loan servicing for the new company, told
Kurland last week that the new operation �has been very successful, very
strong. In fact, it�s off-the-charts good.�
This as Kurland leaned back in his white leather chair in
his glass-walled boardroom at the new firm�s, PennyMac, spacious headquarters
in Los Angeles, what with its view of the Santa Monica Mountains. This all, of
course, as the financial markets were tanking, thanks in part to the gang of 12
and Kurland, who personally walked away from Countrywide with $200 million from
cashed in stock.
While hundreds of billion of bucks cascade in from
Washington to capitalize the country�s faltering banks, as well as automakers
and other industries, a whole new economy is rearing its ugly head to swallow
money from various government programs which make up the largest economic
rescue in history. And these predators are still walking the street while California ponders if
gay marriage is legal and Mexican worker-aliens should be flayed and cast out.
Part of this new high-end, dole-economy is made up of
contractors giving the overworked government bureaucrats a hand, i.e., big-time
investors buying up fed-procured failing banks and their lobbyists spinning for
a chunk of the bailout cash. And here is PennyMac, led my Kurland,
56, once the soft-spoken number two guy to Angelo T. Mozilo, often described as
perpetually tanned CEO of Countrywide, the company�s Cesar Romero face.
Here are some highly quotable words about scam-maestro
Angelo Mozilo from The
Architects of Destruction, researched and written by Ian Cooper�s Options
�In 2006, one out of five U.S. mortgages was financed by
Countrywide Financial . . . at a value of roughly 3.5% of U.S. GDP. Good times
for Angelo and his troops.
�One year later, amid swirling questions over a looming
mortgage crisis, Countrywide assured the world it had ample capital and
liquidity to stay in business . . . having disclosed $35.4 billion in reliable
liquidity. Another disclosure: � . . . sufficient liquidity available to meet
projected operating and growth needs and significant accumulated contingent
liquidity in response to evolving market conditions.� Suckers!
�While Mozilo and crew rope-a-doped investors with lie upon
lie, Countrywide managed to burn
through the $2 billion Bank of America cash infusion, an $11.5 billion credit
line used to ease liquidity issues, numerous Fed cash injections . . . AND a
$50 billion �cushion they went on record as having:
�Our mortgage company has significant short-term funding
liquidity cushions and is supplemented by the ample liquidity sources of our
bank. In fact, we have almost $50 billion of highly reliable short-term funding
liquidity available as a cushion today. It
is important to note that the company has experienced no disruption in
financing its ongoing daily operations, including placement of commercial paper
�Just seven days after that spirited media performance, the
company announced it was facing �unprecedented disruptions� in debt and
�Finally, in December �07, after months of spiraling
anguish, Mozilo threw in the towel and left Dodge. Come July, Bank of America
and Countrywide had officially inked the shocking takeover. It was an all-stock
deal that, for Countrywide, shook out to less than 20% of the company�s $24
billion market value just one year prior.
Meanwhile, job cuts at beleaguered Countrywide have reached
five-figure territory, as employees wait it out, day by day, on the chopping
�Friends of Angelo� (FOAs):
�A June 2008 Conde Nast Portfolio expose� revealed a
number of influential lawmakers and politicians who became beneficiaries of �favorable
mortgage financing� from Countrywide. The list of FOAs includes Senate Banking
Committee Chairman Christopher Dodd, Senate Finance Committee Chairman Kent
Conrad, and former Fannie Mae CEOs Franklin Raines and Jim Johnson.
�According to the report, Senator Dodd�s arm was twisted to
the tune of a $75,000 reduction in mortgage payments from Countrywide on his
two homes . . . at rates reportedly well below market!�
�From 2005 to 2007, Mozilo dumped a large portion of his
Countrywide stock, turning a reported $291.5 million profit. Shortly after, CFC
shareholders filed a class action suit, citing securities violations.
�In early 2008, it was reported that Mozilo could walk with
up to $110 million. Such a payout would come on top of the $140 million gains
he made selling Countrywide stock during the mortgage crisis.
�Mozilo also had two pensions. His severance agreement gives
him the right to receive as a lump sum on his departure. Those pensions were
worth $24 million at the end of December 2006.
�According to reports, Mozilo and his wife would also receive
three years of life and financial planning benefits, in addition to
compensation for any penalties he�d have to pay for receiving any payments
considered excessive by the IRS.�
Back to Kurland
Now, with a teacher like this how could Kurland
go wrong, or how wrong could he go? Or how low could the whole cursed group go?
Well, they see PennyMac�s perdition as a model for how the federal government
working with banks can help stabilize the housing market and lead us like Moses
out of the Red Sea or red ink of the worst
�recession� since 1929.
I see them as a RICO suit waiting to happen, and headed to
jail, if anybody has the guts to send them for a long time. These guys are
among the major perps of our current disaster, even if they are providing some
perverse help for distressed homeowners. Margo Sanders, a lawyer with the
National Consumer Law Center, who has fought to put limits on predatory
lenders, said �It is sort of like the arsonist who sets fire to the house and
then buys up the charred remains and resells it.� Think about that. Destruction
on destruction like one of those white on white shirts the banksters used to
love to wear.
Kurland does admit that he pushed Countrywide into
higher-risk loans, most of which have since tanked in default. But he insisted
that loans under his tenure only went to solvent borrowers who could repay. He
claims the trickiest lending occurred after he left Countrywide in late 2006,
after an �internal conflict� with the Don, Angelo Mozilo.
He regrets what happened to Countrywide and the mortgage
industry, but takes none of the blame. Yet lawsuits betray Kurland�s
view of his role. He is accused of being at the center of this financial
earthquake that started at Countrywide in 2003, when the company hyped �teaser
loans� with low initial rates that at some point expired and ballooned into
unaffordable toxic loans for borrowers.
One lawsuit filed by New York State�s Comptroller asserts
that Kurland knew the full deal on the risks and what�s more consciously misled
Countrywide investors about the shakiness of the company�s portfolio, which
grew from $62 billion to $463 billion in the last six years of his tenure.
Blair A. Nicholas, a lawyer representing retired Arkansas teachers who are also suing Kurland and other
former Countrywide crooks said, �Kurland is
seeking to capitalize on a situation that was a product of his own creation.� Kurland�s lawyer in several of these suits, David K.
Willingham, said that the allegations were without merit and motions have
already been filed to seek their dismissal. The check is in the mail.
And get this. Federal banking officials, while not naming Kurland, said that just because an executive worked at an
institution like Countrywide did not mean he was to blame for the bad lending
practices. Hey, it�s the janitor�s fault. No, the devil made him do it. Yeah,
call Hell, see if Satan�s in. Indict him.
The friend and the
friends of the friend
In truth, here�s the real culprit. A childhood friend,
Lawrence Fink, now chief exec at BlackRock, called Kurland.
Blackrock�s best [or worst] and some other friends were trying figure out how
to scam some profit from the disaster by scooping up distressed loans at
bargain basement prices. Mr. Fink (he was Satan) lured Kurland back in business
and BlackRock invested. Oh, that makes it all different. And, thus, PennyMac
was born, the progeny of another white collar crime family.
PennyMac, which stands for Private National Mortgage
Acceptance Company, also got some loot from hedge fund Highfields (love
morality) Capital in Boston. Other friends included Atlantic Philanthropies
(based in Bermuda, ahem) and the offspring of
the billionaire former owner of DFS Group, a chain of duty free shops.
PennyMac makes its money buying loans from tanking or tanked
financial institutions at a discount so large that it offers to slash interest
rates or make other loan cuts to lure borrowers into resuming payments, while
still walking away with an enormous profit. Folks, we are looking into the
heart of darkness here. And listen to this.
PennyMac�s biggest deal to date is with the Federal Deposit
Insurance Corporation. It paid them $43.2 million (the equivalent of 38 cents
on the dollar) for $560 million of largely delinquent loans warehoused after
last year�s failure of the First National Bank of Nevada. The bulk of these loans were the
Countrywide variety, with the teaser interest rates that suddenly balloon. Under
the terms of the FDIC deal (and ask why is the government dealing with not
arresting these crooks), PennyMac gets to keep 20 cents (which eventually will
go up to 40 cents) on every buck it collects from borrowers, the government
getting the rest. And by the way, we�re paying for the government. So bottom
line, you know who is screwed.
In fact, shifts of telephone operators at PennyMac rack up
15 hours a day trying to re-hook borrowers whose loans PennyMac now controls.
Actually, it could turn out to be a pretty good deal for them, but once again a
lousy deal for the taxpayer.
Penny Mac is looking for a 20 percent annual profit, also
calling other investors to build up its portfolio, now stuffed with $800
million in loans rising to $15 billion in the next 18 months, vigorish on the
vigorish or, as we say, vig on vig.
Of course, the jerks who first took the bad loans are all
too happy to take the good deal now on paying them off, perhaps the saddest
commentary of all. One said, �What matters is that we know our house is secure
and our credit is safe.� Jesus H. Meet you on the breadline, baby.
Jerry Mazza is a freelance writer living in New
York City. Reach him at email@example.com. read his new book, �State Of Shock: Poems from 9/11 on� at www.jerrymazza.com, Amazon or Barnesandnoble.com.