Let me start with a confession, well ... two confessions: First, I have always been a big fan of the sensational Congressional inquiry. Even as a child, during the Watergate hearings, I indulged in that secret smugness that comes from watching the rich and the powerful get theirs. Until recently, I have found few things as satisfying as the televised spectacle of some corrupt public figure, titan of industry, or scandalized bureaucrat withering under the relentless attack of my representatives on the Hill. Where the criminal justice system has been unable or unwilling to intervene, the Congress, at least, provided a public forum for getting to the truth and, by extension, stoking my sense of moral outrage. But that was before.
My second confession is that I am Lori Mozilo, youngest sister of Angelo Mozilo who, up until recently, was Chief Executive of Countrywide Mortgage. I am not employed by Countrywide, do not own Countrywide stock (I sold low, years ago), nor am I a recipient of money from my brother in any way. I haven't checked in with anyone - not my brother, not a lawyer, nor a public relations person, before writing this. I am writing because, although the Congressional hearings on the mortgage crisis did indeed stoke my sense of moral outrage, my anger, this time it has been reserved for Henry Waxman and the Democrats on his committee. As for the truth, it has been in very short supply. Like the reporters for a Beltway tabloid, Mr. Waxman and his partisans seemed to lose interest in the truth the moment it got in the way of the story they wanted to tell, a story characterized by handwringing, finger-pointing and shameless self-promotion. I have to admit, if I hadn't had the advantage of some firsthand knowledge about the subject, I might not have noticed.
At this point, it is probably worth mentioning that I am a life-long Democrat, an old school liberal, who has jokingly been called a "Communist" by a few family members for my lefty leanings. My brother and I sometimes do not agree when it comes to politics, but beneath the veneer of party affiliations, we share many core values. Angelo has always championed equal rights for all: blacks, whites, gays, women, immigrants. He has spent a lifetime trying to bring the dream of home ownership within reach of all Americans. This is a goal which has been championed by Democrats for decades, and which required the loosening of credit standards to include people who have historically been denied affordable loans.
When I was a kid, my brother explained to me why he was in the mortgage banking business. He believed that home ownership was a pillar to building neighborhoods, communities, and ultimately, a strong country. He explained that people care about their sidewalks, their schools, their neighborhoods, and their neighbors when their personal finances are tied to them. He believes in home ownership as a literal shareholding in our mutual destinies (my words, not his). He was ambitious and smart, but he was also idealistic. He believed every American could one day own a home and be a part of the shared experiment called America. I admire my brother. He's tough, a big thinker, and the staunchest believer in the American dream I have ever met.
When the mortgage crisis first broke, there was as flurry of innuendos and ill-informed allegations about Angelo, his compensation package, his stock options, and his roll in instituting predatory sales practices at Countrywide. It seemed that fact checking had become a thing of the past and reporters were merely recycling misinformation they had gotten from each other. How naïve it now seems that those of us who are close to Angelo looked forward to his getting a chance to set the record straight. After all, we thought, no one is more careful about following the rules than my brother. At family functions, Angelo refrained from even the most casual conversations about Countrywide for fear he might inadvertently reveal privileged information. When summoned to Washington, he arrived with copious documentation addressing all the issues that had been at the source of the rumors surrounding his part in the crisis: the expanded use of sub-prime mortgages during the Clinton administration to increase home ownership for lower income families, the details and rationale behind his compensation package with Countrywide and his extended tenure with the company at the behest of the board of directors. He brought documentation to show that when it came to liquidating his stock, he was on a payment schedule determined by the SEC itself, and he always sold within predetermined pay periods; to do otherwise would have been against the law.
The congress and the SEC had already seized and pored over more than thirty thousand of his emails, computer records, and documents. But even with no evidence of wrongdoing, Rep. Waxman and my fellow Democrats on the Committee had no interest in setting anything straight. Their purpose, in this election year, was to conduct a public flogging, to demonstrate that they were on the case, to express their righteous indignation on behalf of their party and their constituents. Also singled out in this choreographed ritual were E. Stanley O'Neal, former Chairman and Chief Executive of Merrill Lynch and Chuck Prince, his former counterpart at Citigroup. All three men shared the common experience of having risen from humble beginnings. All three had served for decades in their industry, and each was personally responsible for bringing the American dream within the reach of thousands of Americans.
Oh, and they were rich. Really rich. American's have a funny relationship with their wealthiest citizens, a love-hate dynamic that Mr. Waxman knew he could exploit to great effect in the midst of our current economic downturn. The subtext of these hearings was: "Look, it's okay to be successful, but not too successful." Politicians have no problem with the super-rich when they are soliciting them for campaign funds, or honoring them for their contributions to charitable organizations, or consulting them for advice on matters of public policy, but they will sell them down the river in a heartbeat for a few hours of quality time with a TV camera. I don't mean to suggest that every Congressional hearing is mere political theater. Henry Waxman's work on behalf of health care has been admirable, but he must have known going into these hearings on the mortgage crises that, in the absence of any hard evidence of malfeasance, the only thing he could hope to accomplish was to ruin the reputations of men like my brother. Is this really the climate we want to create for the innovators, entrepreneurs and big thinkers in our country? Look, I personally have issues with huge compensation packages. I can't really process the amount of money paid to top executives or, for that matter, movie stars or big name athletes, so if Mr. Waxman wants to convene a panel to discuss the complexities capitalism itself, I'll tune in.
But witch-hunts are not about problem solving, and I guess Mr. Waxman and other politicians figure that the reputation of a few rich men is a small price to pay to divert attention from their own failure of leadership because, after all is said and done, failure of leadership is the real crime here and, in that regard, there is plenty of blame to go around. Certainly, leaders of the banking industry share the responsibility, as does the media, in particular the financial press, and especially our elected officials whom we pay to watch out for our interests.
I've heard, "Mozilo had to have seen it coming and didn't say anything." Please. I'm no genius, particularly in financial matters. But I do own a home and I knew it wasn't worth what people were leaving notes on my porch telling me they'd pay me for it. I knew the real estate bubble had to burst one day, just as I knew a decade earlier that paying people a million dollars for the name of a website that didn't exist was probably not going to turn out that great, either. The Committee ignored much evidence that my brother was actually quite optimistic about the future of his industry. That he, in fact, did not see it coming, because if they had presented that evidence, perhaps they wouldn't have been able to facilitate a public catharsis for our collective frustration. Sure, Angelo and others in the mortgage banking industry should have seen it coming -- and the politicians, the borrowers, Alan Greenspan, and all the financial experts should have, too.
There is also the so-called "FOA (Friends of Angelo) scandal." Will all FOA's please stand up? They will include: strangers, Senators, neighbors, cab drivers, doormen, nannies, even a sister or two. FOA was the name given to Angelo's personal pipeline of loans because he didn't work out of a branch office. And yes, he did give deals. Not illegal, shady deals, just plain old American, good deals. People from all mortgage companies have room in negotiating mortgages -- it's a completely legitimate business practice. Nothing was illegal or unseemly. Angelo originated loans. He'd say to me, "If any of your friends are looking for a loan, tell them to call Countrywide, tell them to say they are an FOA." They did call, and some of them got rates better than those offered by other companies. Some of them did not, and went elsewhere. I myself did not have a Countrywide loan for many years because Washington Mutual beat the "FOA" rate I was offered. I know, it's not sinister or interesting, but it's the truth.
Two days ago IndyMac Bank was taken over by the Fed. Senator Charles Schumer's public release of a letter to the Office of Thrift Supervision and the FDIC expressing concerns about IndyMac's viability has been cited by the OTS as one of the major reasons for the bank's liquidity crisis and its subsequent take over. In the following 11 business days after the public's access to Mr. Schumer's letter, IndyMac customers withdrew over $1.3 billion from their accounts. Chuck Schumer vigorously denies his actions had any effect on the situation. Perhaps Rep. Waxman should convene another panel. The press can fire up the TV cameras and we can all start asking some questions. Surely someone else is ready for their close-up.