The best and the brightest aren’t, sometimes

My friend Mario a crook? I find this troubling

Bank of America’s purchase of Countrywide Mortgage has cost $40 billion so far and is still climbing. Oh – it also cost 30,000 people their jobs.

Bank of America Corp. thought it had a bargain four years ago when it paid $2.5 billion for tottering mortgage lender Countrywide Financial Corp. But the ill-fated decision has already cost the Charlotte, N.C., lender more than $40 billion in real-estate losses, legal expenses and settlements with state and federal agencies, according to people close to the bank.

“It is the worst deal in the history of American finance,” said Tony Plath, a banking and finance professor at the University of North Carolina at Charlotte. “Hands down.”

If you remember John Sculley, the man who almost ruined Apple in 1983-1993, you may also remember that after Apple fired him he joined Applied Spectrum Technologies as its head, only to discover that the company was a nest of penny stock fraudsters. This was described as “the worst business decision of his life”, adding a neat bookend to Apple’s decision to hire him in 1983.

But here’s the point: if BOA had asked around the real estate community they would have heard enough alarming news about Countrywide’s lending practices to offset the corporate world’s view of Countrywide and its friend-of-Dodd Chairman Mario Mozili as a legitimate business. Had Sculley, instead of hiring a hugely expensive white shoe law firm to vet Spectrum, as he insisted he did, and asked a low brow securities fraud lawyer what the significance was of the Spectrum crowd’s NASDAQ disciplinary history, he’d have spared his reputation and a lot of cash.

You don’t need a thief to catch a thief, but asking someone who’s chased thieves their opinion of a particular individual or institution might yield information that will surprise you.

5 Comments

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5 responses to “The best and the brightest aren’t, sometimes

  1. AJ Nock

    Mario Mozili??? I think you mean Angelo Mozillo. guess you don’t hang out with many Italians.

  2. Anonymous

    BoA didn’t even need to ask around the RE community, there was enough bad information out on Countrywide that I was stunned to see BAC purchase them. There used to be a blog called something like “ex-countrywide insider” which invited former employees who’d (mostly) left in disgust to share their knowledge of the workings of CW and its upper management with the public anonymously. There was enough credible information in that blog combined with the excellent reportage by the late Tanta of the Calculated Risk economics blog to stun everyone except, apparently, Ken Lewis of BAC.

    Tanta’s criticism of Countrywide (and other lenders) dates back to 2005 when most thought everything about the economy and housing was just peachy.

    Wonderful stuff for nerds who don’t have much knowledge of mortgage financing and practices. Everything from reverse mortgages to underwriting standards (and lack) to MBS, ratings etc.

    http://www.calculatedriskblog.com/2007/07/compleat-ubernerd.html

    Entertaining writing as well as a ton of facts. I wish she’d lived a long and healthy life but she passed away in 2008 at age 47 just as the shit really started to hit the fan. I still miss her and her wonderful writing and clarity in explaining complex topics.

  3. AJ

    Mainstream Economics is a Cult
    Neoclassical Economics Is Based on Myth

    Neoclassical economics is a cult which ignores reality in favor of shared myths.

    Economics professor Michael Hudson writes:

    [One Nobel prize winning economist stated,] “In pointing out the consequences of a set of abstract assumptions, one need not be committed unduly as to the relation between reality and these assumptions.”

    This attitude did not deter him from drawing policy conclusions affecting the material world in which real people live….

    …Black explains:

    [Neoclassical economists believed that] fraud is impossible because securities markets are “efficient” and act as if they were guided by an “invisible hand.” Markets cannot be efficient if there is accounting control fraud, so we know (on the basis of circular reasoning) that securities fraud cannot exist. Indeed, when [mainstream economists] try to explain why the securities markets automatically exclude frauds their faith-based logic becomes even more humorous….

    http://www.washingtonsblog.com/2012/06/mainstream-economics-is-a-cult.html

  4. AJ

    Big Banks Have Become Mafia-Style Criminal Enterprises
    Banks Conspire to Fleece the Public

    Two stories this week prove once again that the big banks are literally criminal enterprises.

    Initially, all of the big banks have engaged in Mafia-style “bid-rigging” of municipal bonds, to bilk money from every city in the nation … to the collective tune of tens billions of dollars.

    And Barclays and other large banks – including Citigroup, HSBC, J.P. Morgan Chase, Lloyds, Bank of America, UBS, Royal Bank of Scotland – manipulated the world’s primary interest rate (Libor) which virtually every adjustable-rate investment globally is pegged to….

    http://www.washingtonsblog.com/2012/06/big-banks-conspire-to-game-the-main-interest-rate-indicator-and-to-fleece-cities-and-counties.html

  5. AJ

    There will never be an economic recovery as long as the government allows the real economy to be eaten alive by the Banksters false economy which is entirely based on placing bets on bets on bets while the lucky suckers known as citizens are left holding the bag — and nothing real is produced, not products nor services.

    …JPMorgan’s share of the subsidy is $14 billion a year, or about 77 percent of its net income for the past four quarters. In other words, U.S. taxpayers helped foot the bill for the multibillion-dollar trading loss that is the focus of today’s hearing. They’ve also provided more direct support: Dimon noted in a recent conference call that the Home Affordable Refinancing Program, which allows banks to generate income by modifying government-guaranteed mortgages, made a significant contribution to JPMorgan’s earnings in the first three months of 2012….

    http://www.washingtonsblog.com/2012/07/77-of-jp-morgans-net-income-comes-from-government-subsidies.html