In an afternoon press conference, the Securities and Exchange Commission announced that former Countrywide CEO Angelo Mozilo has been charged with fraud.
The Washington Post reports that “from 2005 to 2007, the SEC alleged, Countrywide dramatically loosened its standards even though these executives were warned that the company would have trouble selling loans into the market. Countrywide was required to disclose these risks to investors, but didn’t do so, the agency said.
“This is a tale of two companies,” said SEC enforcement director Robert Khuzami in a press conference. “Countrywide portrayed itself as underwriting mainly prime quality mortgages using high enforcement standards. But concealed from shareholders was the true Countrywide, an increasingly reckless lender assuming greater and greater risk.”
In 2008, CNBC named Mozilo as one of the “Worst American CEOs of All Time.”
According to the CNBC website, Mozilo “made subprime a household word. Once a symbol of self-made accomplishment—a butcher’s son who built the largest mortgage lender in the country—Mozilo became blinded by success and began going after the riskiest and most unsavory of borrowers to boost his company’s market share. In doing so, he legitimized a sector that would ultimately bring down the economy.”
I wrote about Mozilo in June, 2008 when I talked about his “Friends of Angelo” program that provided loans on favorable terms to influential borrowers, including Senators Chris Dodd and Kent Conrad.
Now, the other shoe has dropped. Mozilo is the first CEO of a financial firm to be charged with wrong-doing in connection to the financial crisis.