Ex-Countrywide Execs Making Money Off Misery They Created
Yves Smith at Naked Capitalism has a great take on a story making the rounds on the Internet today, a New York Times piece on former Countrywide Financial executives cashing in on distressed mortgages. Obviously, this is very rich, considering Countrywide once stood as the nation’s largest subprime lender, turning huge profits on the subprime loans that are at the heart of the crisis.
From the Times piece:
Stanford L. Kurland, Countrywide’s former president, and his team have been buying up delinquent home mortgages that the government took over from other failed banks, sometimes for pennies on the dollar. They get a piece of what they can collect.
“It has been very successful — very strong,” John Lawrence, the company’s head of loan servicing, told Mr. Kurland one recent morning in a glass-walled boardroom here at PennyMac’s spacious headquarters, opened last year in the same Los Angeles suburb where Countrywide once flourished.
“In fact, it’s off-the-charts good,” he told Mr. Kurland, who was leaning back comfortably in his leather boardroom chair, even as the financial markets in New York were plunging.
How nice for Mr. Kurland, and his ilk. Never mind that Kurland has been named in lawsuits charging that Countrywide sold reckless and predatory loans, with low teaser rates that exploded into much higher rates. And, of course, those loans tanked.
Here’s how Smith, of Naked Capitalism, sees it:
Unfortunately, there is a proud tradition in finance of bad actors finding profitable employment doing more or less what they did that created a train wreck. Drexel sold S&Ls a lot of the junk that brought them to ruin (and “sold” doesn’t even begin to describe it. A regulator told me that Lincoln Savings would get a daily fax from Drexel of what it had bought, and then when the regulators came a calling, Lincoln realized it was supposed to have filed demonstrating that it had done due diligence on the investments. It hired Arthur Andersen to create the phony paper trail). And the principals of LTCM, having nearly brought the financial system to its knees, started another hedge fund.
It’s odd, as Smith points out, that being named in lawsuits over your lending behavior is no obstacle to success:
It’s funny how standards vary. If a company with a great technology was seeking funding, and there was outstanding litigation against the principals alleging misconduct, most VCs would pass on the deal. But if you are in the money game, as opposed to the building real businesses game, character might be viewed as an impediment to success.
There’s no way to look at Kurland’s new venture as anything but an unfortunate consequence of our failed financial system. Let’s just hope he doesn’t end up hailed as some sort of business icon. Of course, there’s always CNBC for that, which no doubt will hail a former merchants of misery, cashing in once again.