Saturday, March 8, 2008
WSJ - FBI Investigates Countrywide
Glenn R. Simpson and Evan Perez, Wall Street Journal, report that the Federal Bureau of Investigation is probing subprime lender Countrywide Financial Corp. for possible securities fraud, according to law-enforcement officials and finance-industry executives. The inquiry involves whether company officials made misrepresentations about the company's financial position and the quality of its mortgage loans in securities filings.
Federal investigators are looking at evidence that may indicate widespread fraud in the origination of Countrywide mortgages, said one person with knowledge of the inquiry. If borne out, that could raise questions about whether company executives knew about the prospect that Countrywide's mortgage securities would suffer many more defaults than predicted in offering documents. Another potential issue facing the company is whether it has been candid in its accounting for losses. People familiar with the matter said that Countrywide's losses may be several times greater than it has disclosed.
Ahh! The coverup. Always the coverup. One would think these people would learn something from scandals like Watergate and Enron. But they never do. First they think they're too smart to screw up, and take shortcuts. Then, when they find they're in trouble, they cover up and think no one can uncover the cover-up. Sad to say, but it always comes out. There's a not a single financial scandal which hasn't gone through the same stages. Screw up, cover up, cover blown and the sky falls down. Only it's much worse because of the cover-up.
The article also goes on to say that Bank of America is trying to fast-forward the pending acquisition of Countrywide Corp. There's only way for BofA to get Countrywide out of this mess in one piece. And that is to kick Angelo R Mozilo, CEO of Countrywide Corp. out of the boardroom as fast as possible. Mozilo has run Countrywide like a mom-n-pop store, making arbitary decisions and pushing it in a direction which he liked, rather than what was good for the company. Countrywide is basically one big ego trip for Mozilo, and the sooner they sever ties with him, the easier it will be to stage a recovery. At the very least, they can blame it all on him and request that everyone move on. Making a scapegoat out of Angelo Mozilo won't be a pretty thing, but it would definitely be preferable to watching Countrywide Corp. being destroyed.
Federal investigators are looking at evidence that may indicate widespread fraud in the origination of Countrywide mortgages, said one person with knowledge of the inquiry. If borne out, that could raise questions about whether company executives knew about the prospect that Countrywide's mortgage securities would suffer many more defaults than predicted in offering documents. Another potential issue facing the company is whether it has been candid in its accounting for losses. People familiar with the matter said that Countrywide's losses may be several times greater than it has disclosed.
Ahh! The coverup. Always the coverup. One would think these people would learn something from scandals like Watergate and Enron. But they never do. First they think they're too smart to screw up, and take shortcuts. Then, when they find they're in trouble, they cover up and think no one can uncover the cover-up. Sad to say, but it always comes out. There's a not a single financial scandal which hasn't gone through the same stages. Screw up, cover up, cover blown and the sky falls down. Only it's much worse because of the cover-up.
The article also goes on to say that Bank of America is trying to fast-forward the pending acquisition of Countrywide Corp. There's only way for BofA to get Countrywide out of this mess in one piece. And that is to kick Angelo R Mozilo, CEO of Countrywide Corp. out of the boardroom as fast as possible. Mozilo has run Countrywide like a mom-n-pop store, making arbitary decisions and pushing it in a direction which he liked, rather than what was good for the company. Countrywide is basically one big ego trip for Mozilo, and the sooner they sever ties with him, the easier it will be to stage a recovery. At the very least, they can blame it all on him and request that everyone move on. Making a scapegoat out of Angelo Mozilo won't be a pretty thing, but it would definitely be preferable to watching Countrywide Corp. being destroyed.
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