Observer » countrywide financial

Morning Roundup: The Prodigal Loan

Mike Taylor — Thu, 30 Dec 2010 12:22:23 -0400

When people say they're mad at all the banks for not lending to businesses and getting the economy going again, you can tell them they're crazy, because commercial and industrial lending rose by a whopping 0.2 percent in the fourth quarter. [WSJ]
Aggressive cost-cutting by the airline industry worked out okay until a blizzard hit and carriers were reduced to helpless bleating over Twitter. [Bloomberg]
The observation that Europe is facing a huge debt crisis has done little to make European policymakers reevaluate their decisions. [NYT]
Allstate, the insurer, is suing credit-crisis posterchild Countrywide Financial (now part of Bank of America) and former Countrywide CEO Angelo Mozilo over some allegedly destruct-o-matic mortgage-backed securities. [AP]
Private equity titan BlackRock plans to make a "world-class trading platform" that will be the envy of all other trading platforms throughout the land, according to a leaked memo. [FT]

mtaylor [at] observer.com | @mbrookstaylor

The Math Behind The Countrywide Settlement

Mike Taylor — Fri, 15 Oct 2010 21:35:53 -0400

According to a complaint by the Securities and Exchange Commission, former Countrywide chief Angelo Mozilo pocketed around $140 million by selling shares of his company when he knew based on inside information that the stock was headed for a fall. In today's settlement of the SEC case, the agency is assessing a $67.5 million penalty against Mozilo. The penalty includes the return of $45 million in ill-gotten profit and a $22.5 million disgorgement fee.

Why the discrepancy between what Mozillo took home and what he paid in the settlement?

On a conference call with the media today, SEC chief enforcement officer Robert Khuzami said that his agency seeks a "net number" in assessing penalties related to insider trading. The idea is to tease out how much Mozilo benefited from his wrongdoing specifically vs. other factors that might have been at play that affected Countrywide's stock price.

For example, Khuzami said, a factor like the overall decline in the housing market precipitated share-price declines across companies in the mortgage business would not be taken into account in assessing a penalty against Mr. Mozilo.

"That's the subject of expert witness testimony. ... There's often considerable disagreement," Mr. Khuzami said.

Not exactly an eye for an eye.

Khuzami fielded multiple questions from reporters who were interested in finding out exactly how much of the SEC penalty would come out of Mozilo's pocket. Khuzami told reporters to refer such questions to Bank of America and Mozilo himself.

mtaylor [at] observer.com | @mbrookstaylor

Angelo Mozilo and Countrywide Co-Defendants Settle SEC Beef

Mike Taylor — Fri, 15 Oct 2010 19:28:45 -0400

As reports suggested earlier today, the three ex-Countrywide Financial executives that faced civil fraud charges have settled the beef, avoiding a trial that had been scheduled for next week, according to the Associated Press.

Former Countrywide CEO Angelo Mozilo is now set to pay back $45 million "in ill-gotten profits," the AP says. He will also pony up $22.5 million in civil penalties. The SEC accused the trio of misleading investors about the quality of Countrywide's mortgage portfolio, and a civil complaint alleged that Mozilo had traded on insider knowledge when he sold shares of the company before the stock cratered. According to regulators, Mozilo pocketed somewhere in the neighborhood of $140 million as his company teetered toward collapse.

Ex-President David Sambol is paying back $5 million in ill-gotten profits and $520,000 in civil fines, and former CFO Eric P. Sieracki is shelling out $130,000 in civil penalties. They are not admitting wrongdoing.

Countrywide had earlier settled shareholder lawsuit for $600 million. In that case, the plaintiffs alleged the firm had misled investors about the quality of its books. Mozilo, Sambol and Sieracki were likewise named as defendants in that suit.

Update: David Sambol's attorney was kind enough to send the following statement regarding today's settlement:

Mr. Sambol has agreed to settle the S.E.C. lawsuit and put the matter behind him for the benefit of his family and loved ones. Notably, in connection with the lawsuit's resolution, Bank of America will pay the entire disgorgement amount prescribed in the settlement on Mr. Sambol's behalf. While the agreement with the S.E.C. prevents him from discussing the case, it makes clear that Mr. Sambol does not admit to any of the S.E.C.'s assertions.

Update 2: David Sambol's attorney would like the record to show that Countrywide, not Bank of America, is paying the entire disgorgement amount.

Mr. Sambol has agreed to settle the S.E.C. lawsuit and put the matter behind him for the benefit of his family and loved ones. Notably, in connection with the lawsuit's resolution, Countrywide Financial Corporation will pay the entire disgorgement amount prescribed in the settlement on Mr. Sambol's behalf. While the agreement with the S.E.C. prevents him from discussing the case, it makes clear that Mr. Sambol does not admit to any of the S.E.C.'s assertions.

mtaylor@observer.com

Twitter: @mbrookstaylor

Former Countrywide Brass May Settle SEC Suit

Mike Taylor — Fri, 15 Oct 2010 13:42:28 -0400

Former members of Countrywide Financial's management team may be partly off the hook for Securities and Exchange Commission charges that include fraud and, for ex-CEO Angelo Mozilo, an insider-trading beef.

The New York Times reports that settlement talks have ramped up over the SEC suit against ex-Countrywide execs Angelo Mozilo, David Sambol and Eric Siracki, and that at least one defendent may reach an agreement. The case had been slated to go to trial on Tuesday, but the presiding judge has scheduled a conference call for this morning, presumably to see if there's room for rapprochement among concerned parties.

"The case has attracted widespread attention because it is one of the only securities enforcement actions to emerge from the mortgage crisis that has resulted in charges against top executives at a company at the heart of the mortgage mania," says The Times. Depending how the current foreclosure mess shakes out, the Countrywide case may not be the last.

mtaylor@observer.com

Twitter: @mbrookstaylor

Morning Roundup: Foreclosure Follies Foil Financial Firms

Mike Taylor — Fri, 15 Oct 2010 12:11:42 -0400

Wall Street has woken up to the idea that the foreclosure crisis could force banks to modify huge amounts of loans, and stalled evictions could hamper payments to bondholders. The stock market has begun to act accordingly. [WSJ]
On a related note, according to the credit-default-swaps market, Bank of America is no longer an investment-grade borrower. This might have something to do with the banking giant's 2008 acquisition of housing-crisis posterchild and all-around basket case Countrywide Financial. [Bloomberg]
Ben "Bernankers" Bernanke will speak about the economy today, and markets around the world wait with baited breath to see if he will fire up his magical economy-saving quantitative easing machine. [AP]
General Electric, which makes lightbulbs and is at least partly responsible for daily on-air appearances by Larry Kudlow, Jim Cramer and Michelle Caruso-Cabrera, announced a 29 percent year-over-year increase in third-quarter profit from continuing operations, beating Wall Street expectations. [NYT]
Neither you, nor me, nor anyone else can stop the price of gold from rocketing higher. Gold help us all. [Reuters]

mtaylor@observer.com

Twitter: @mbrookstaylor