How do you put a spin on a fourth quarter loss of $422 million if you're Angelo Mozilo, soon-to-be former CEO? By being a real stand up guy, that's how. Mr. Mozilo stated yesterday he was going to “forfeit” $37.5 million of his severance package. I guess he's hoping we've forgotten that this still leaves him with $77.5 million. Not to mention the $400+ million Mozilo cashed out in stocks in '05 and '06.
He also humbly (this is a humble man, people) announced he was going to forgo the $400,000 per year in “consultancy” fees Countrywide was going to pay him – after his departure.
The mind... REELS... Must... MOCK... FAT CATS!
Maybe what compelled Mozilo to humbly step away from the consultant's role was his insistence in October that Countrywide would “return to profitability” in the fourth quarter. The 11,000 former Countrywide employees laid off in the past five months must be laughing as they deposit their big, fat unemployment checks.
No doubt they're touched by the incredible sacrifice Mozilo has made – leaving behind that $37.5 million. Isn't that an odd figure? Why 37.5? Why not 35? Or 40? Or even 38? Causes one to wonder, doesn't it? As if this $37.5 million is some monetary appendage, some element of deferred compensation that Mozilo and his lawyers and accountants decided he can live without – all the while spinning it to make it sound as if he's done something smacking of noble.
Overall Mozilo has only lost Countrywide $2.26 billion in the past six months. And of course since the vast majority of his compensation is deferred, Countrywide will be paying tax on that, too. Is it any wonder he felt compelled to give up a whopping seven percent of his total compensation for the past three years? No doubt he'll want to apply it to his little boo-boo. It'll cover all but 98.7% of this debacle.
No doubt, someone will come along and suggest that all this isn't “that bad”. Of course not. The $9 billion Merrill lost, the ten-plus billion dollars Morgan Stanley's lost... and on and on. Really, no big deal. Because we'll all end up paying for it eventually.
But I don't feel bad. Not since Mozilo's offered to chip in...
Article comments
— go to most recent comments1 - Dave Nalle
To be fair, the government and the taxpayers are not going to be bailing out Countrywide. It appears that those with deeper pockets and a more long-term view of the situation think that their assets are worth acquiring, hence Bank of America is buying them out.
In point of fact, Countrywide's amazing mismanagement, greed and stupidity, have created a great opportunity. The company's value has declined to a fraction of what it was worth a few years ago, yet it holds assets in the form of property and mortgages which are likely to return to its former value or far more within 5 years.
In buying them out BofA pays relatively little for an investment which is likely to appreciate in value at a rate far faster than any other investment of similar solidity.
As you point out, the only real losers here are Countrywide's employees, but since they were largely party to the kind of rapacious business practices the company engaged in I don't feel too sorry for them. Do you, Marlowe, honestly shed any tears for the guy who sold a front-loaded ARM to a family of immigrants on a house made out of cardboard whose monthly payment was 50% of their family income? He knew what he was doing and is as much at fault as the CEO. Maybe moreso.
Dave
2 - P.Marlowe
Big Dave! Glad to see you've survived the Dallas storm so far!
This was a quick post... I didn't have time to explain my assertion that "we" would be paying for Mozila's Mistakes... You're right - as a taxpayer I won't see this. But as a consumer I will. We're all going to pay - hell, we already ARE paying... The COST of these "mistakes" will be passed on to us - don't think they won't...
A perfect example of this (and there's so many) is found up here in Portland, Oregon. Back in the day when Enron owned Portland General Electric and was at the height of rigging the power infrastructure to make it seem as if there were "power outages" etc., PGE had to TEMPORARILY implement a HUGE rate hike. We were all assured this would only stay in place until the "power emergency" was over...
Well, it's been over for YEARS now and that rate hike has NEVER been reversed.
Bank of America sure as hell isn't going to pay for Countrywide's idiocy. We will, some how, some where. Countrywide's customers are obviously already paying. Certainly the 11,000 employees that have been axed in the past few months are paying. Countrywide's AVERAGE shareholders are screwed...
Seems the only person coming out of this smelling like a rose is Mozila.. Oh, wait... He has given up 7% of that $400+ million. And he won't be paid $400K per year to remain on as a CONSULTANT to Countrywide...
Really, I GOOOTTTTTAAAA wonder... What astute observations would he be giving Countrywide's senior management? Tips on how to cash out their stock portfolio before the company crashes further? How to get paid outrageous amounts of money for being a raging, monomaniacal idiot?
Some of us should call Mozila up... See if he wants to go out for a round of golf... Sure he's feeling down...
Marlowe
3 - Dave Nalle
I'll give you that last point. Why they'd pay a consulting fee to this fuckup is beyond me. I do, on the other hand, understand why they'd pay him a nice fat severance package just to go away and not darken their door again. Paying the money is easier than going through a struggle to force him to leave.
Dave
4 - Baritone
First and foremost I want to be a CEO of a corporation. It doesn't have to be GM, or anything so grandiose. Just a mid level corporation with just a few billion dollars in yearly revenues would be fine. I don't know jack shit about running a corporation - well, except that I am the president of a S corporation and my wife the secretary/treasurer. We've had no vice-presidents since our dog died - but never mind that. I just want the job for a year or two, long enough to put aside a shit load of money - say a couple hundred million or so - and then in order to keep the company from going completely into the shit bin, they can buy me out for, say another hundred million or so. Or, hey, I'm not greedy, I'd settle for seventy five.
Then while I'm counting my money living perhaps in the south of France, the corporation can go belly up for all I care, just as long as I get mine.
Dave invariably knows how to make lemonade out of sour lemons. So, when it comes down to it, all this sub-prime bullshit is really a good thing. While the employees, who Dave claims to be the real bad guys are in line for their unemployment checks, and thousands of people have been kicked out of their homes, the rich have a brand new opportunity to get fucking richer. Maybe B of A can hire Mozilo so he can make it happen all over again. Golly, life is great!
B-tone
5 - Lumpy
Irrational anticorporatism is all lots of fun and everything, but I don't see anyone proposing a better alternative. And with good reason since the alternatives are invariably much worse for workers., the economy and the nation.
6 - Les Slater
Lumpy,
“Irrational anticorporatism is all lots of fun and everything, but I don't see anyone proposing a better alternative. And with good reason since the alternatives are invariably much worse for workers., the economy and the nation.”
From a January 23rd NY Times article, Anxiety Crashes the Party at Davos.
It was reported that Klaus Schwab, Executive Chair of the World Economic Forum, said:
“It’s not that the pendulum is now swinging back to Marxist socialism,” he said in the interview, “but people are asking themselves, ‘What are the boundaries of the capitalist system?’ They think that the market may not always be the best mechanism for providing solutions.”
Alternatives, ‘invariably worse’? Here’s a dude nervously looking over his shoulder. People are looking, and demanding, alternatives.
This system is NOT working. Rather than denying there can be alternatives, it is about time we start discussing what alternatives there can be. This discussion will not be found in the current presidential debate.
Les
7 - Lumpy
Sorry 'bout the multiple posts. I'm getting osting errors.
So Les. Which do you prefer, a command and control centrally planned system, a nice fascist corporate government alliance or perhaps some form of collectivist/syndicalist model?
The problem with all of these alternatives is that they have the state imposing an artificial structure on trade and overriding the natural impulse towards free trade. And the hard reality is that thosw artificial systems are oppresive and inefficient amd fall apart eventually.
Your pal from Davos just sees the current largely fictional economic crisis as an opportunity for another eurosocialist power grab.
8 - Baritone
Given the topic of this article, I am amused that as I write there are 2 google adds directly above for Countrywide Home Loans (One actually says "Hoam" Loans. I guess in all the turmoil that spelling skills are the first things to go.)
Again, we get into the monstrous disparity between what big corporate CEOs and other high level executives make compared to the rank and file workers. There's no reasonable way to graph it.
Apologists for the people who make the obscene amounts of money big corporate mucky-mucks make do so in part because in their dreams they see themselves ascending to that kind of money, and they don't want anybody raining on their parade.
I feel fairly comfortable in saying that I could have led Countrywide to over two billion dollars in losses. How special is the skill set that the typical CEO possesses over and above the lesser minions of executives? Are they really worth hundreds of millions a year more than what others contribute to a corporation's operation?
It seems to me that what is typically valued most in our economy is risk. What is the risk that a corporate CEO encounters? - That if they fail their severence packages might only be say, fifty million instead of a hundred million? That's a tough thing to consider. It might force the Mrs. to start clipping coupons.
B-tone
9 - Dave Nalle
B-tone, you or most of us, could probably have managed Countrywide and NOT taken the huge losses they did. All it would have required was some basic common sense and the ability to see the pretty damned obvious line between exploitative greed and reasonable business profits.
Dave
10 - Les Slater
Dave,
"All it would have required was some basic common sense and the ability to see the pretty damned obvious line between exploitative greed and reasonable business profits."
That's not their job. It is to maximize profits. When everybody else is greedy and you're not, then you're not doing your job. You will fall behind.... and be replaced.
There is no way you or B-tone could survive such an environment.
Les
11 - Baritone
Dave,
You know this scenario has taken place probably hundreds of times over the last several years. Most don't get media attention, but when the corporations are already in the spotlight as Countrywide has been, these separation deals always make the news. Everytime these things are publicized it just creates a wider rift between the haves and have nots. It's just ugly. It's the kind of thing that foments mistrust and hatred. What it says essentially is "Let them eat cake." Someday, it may catch up with all of them.
B-tone
12 - Les Slater
B,
"Someday, it may catch up with all of them."
Let's make it happen.
Les
13 - Baritone
I don't mean to be over dramatic. But history would suggest that people will only take so much. Audacity, arrogance and greed can have it's price.
B-tone
14 - Clavos
Fuckin' rich bastards. Let's kill 'em all and let god sort 'em out.
But get their money first.
15 - bliffle
Corporations have been granted extraordinary powers by the legislature and the courts, and especially by the Executive, as the budgets of the FTC and the Justice Department and anti-trust have been diminished. One of the worst offenders is the "de-regulation" mania which has swept the country for 30 years.
With such extraordinary power and such invulnerability to regulation and prosecution the corps have, naturally, attracted the attention of criminals, most of them in fine suits, well groomed, and well spoken. But they are criminals nevertheless. As someone in the old "Godfather" movie said "you can steal more with that briefcase than with a gun".
Their personal mission is to cash in the retained earnings and "blue sky" (goodwill) of the company for their own benefit.
These are pirates, not founders, builders and pioneers who raise a company and make it more profitable and a better employer.
How do they do it? By using lies and connections to gain some measure of control and then develop a Board Of Directors that they favor with bonuses and golden parachutes in exchange for even bigger perks for themselves.
Yes, they lie on their resumes. Carly Fiorina lied about her stint at Lucent, for example. And if you know better and try to expose them they will scandalize YOU. And people will accept their scandal, even tho they may know better, because they fear the power of such ruthless characters.
This stunt is so rampant in corporate management that it is laughable. In fact, the exec who doesn't lie and scandalize is at a distinct disadvantage and will not get the job. It's a variation of the old Greshams Law: Bad management drives out good.
The looting mechanism is so deeply entrenched that Enron was handing out 'retention bonuses' worth $150million to the corrupt execs even as Enron was going thru bankruptcy, thus depriving shareholders and clients of that money too.
It's on automatic pilot now. Nobody can stop it.
The congress is suborned by lobbyists, the courts are ideologically loaded by the executive, and the executive is drunk on childish theories of a capitalism that actually penalizes real capitalists who build real companies in favor of politically connected Influence Peddlers. The result is no longer Free Markets but a top-down administered market.
The USA economy is being sovietized as surely as if it was being done by Joseph Stalin.
In an unregulated administered economy there is no opportunity for market forces to correct abberations.
The citizenry is drunk on childish fantasies about "free enterprise", and "free to choose", without bothering to study the hard facts of government and economy, that are relentlessly broadcast by a mendacious government through a compliant press.
It happens because they are lazy and can't be bothered to study and struggle, so they go with the flow and contrive convenient but spurious moralities that justify their prejudices.
16 - bliffle
And the employees, for the most part, did not profit. Only the most unscrupulous. My friend L worked for Countrywide the last 3-4 years and did not profit thereby. In fact he lost money, because he's honest and didn't practice the tactics his associates did.
The technique that Countrywide used to fleece L is at least as old as the used car business, and probably goes back thousands of years to the used camel business. The company will hire ANYONE as a salesman (commission only, perhaps preceded by a brief salary period) because they know he'll make two sales: one to himself and one to his uncle (or his bro-in-law, or his best friend, or his cousin, or...) then the company picks up the 'fees' commissions and up-front interest, etc. The employee thinks he's in fat city because he gets part of his money back as a commission, so he keeps trying, and finally qiuts of his own accord after a period of no commissions or poor commissions.
So, lets suppose L buys himself a luxury condo in Acapulco for $1million with $100k down generating a 15k commission for himself (and a like amount for the company, plus fees, plus kickbacks from title insurance, plus...). Pretty good for an afternoons work. next month he sells something to his uncle and it looks good. he keeps trying, but when he runs out of people pre-disposed to trust and like him he doesn't make more commissions and besides that his investment is Under Water, as they say. So is his uncles.
Pretty soon it's 3 years of work with only two paychecks.
17 - P.Marlowe
Essentially what happened in the entire real estate market - not just the sub-prime zone - was/is CHURNING. I worked in the real estate business - on the legal side and saw this first hand.
When Reagan began the Age of the Great Deregulation that's when it all started. Restrictions on CREDIT and WHO could be offered CREDIT became virtually non-existent.
The Real Estate market - by its very nature - must DRIVE the price UP, UP, UP. They CHURN THROUGH the AAA credit worthy population, the AA, the A, B, C... Now it's into the SUB-PRIME...
WHEW! Thank GOD the Republicans have made sure that the credit industry is COMPLETELY unregulated! Others arrive at this feeding frenzy. Hedge funds, banks, domestic and international, securities companies... It's all a game. Pass the RISKY LOANS all bundled up on down the line... Bobby and Karen Sub-Prime my find eventually that their "loan" is owned by a bank in Indonesia...
But eventually, to the surprise of no one that has eyes to see and half a brain the CHURNING stops.
In the case of Countrywide Mr. M knew this was coming. That's why he began cashing out his stock options 3 yrs ago. The American population had been completely strip-mined.
Smart boy that Mozilo...
Marlowe
18 - Dave Nalle
That's not their job. It is to maximize profits. When everybody else is greedy and you're not, then you're not doing your job. You will fall behind.... and be replaced.
Les, there are LOTS of CEOs - by far the majority - who can see the line between greed and fair profit, and live by at least some standard of ethical conduct. Some highly publicized negative examples
There is no way you or B-tone could survive such an environment.
Did I ever mention my brief stint as president of a small corporation? With some able assistance I managed to keep the company alive and profitable and fold it with a profit and without going bankrupt. I'm actually in my second term as president of a charitable corporation now, but that's a different kettle of fish.
Dave
19 - Les Slater
P.Marlowe,
And… of course, the FED saw this too. They just kept on feeding it.
I read the economic news quite carefully. It is God-damned surreal.
Les
20 - troll
me I just enjoy this 'best of all possible worlds' that results when each of us acts in his own interest without considering those of others
21 - Baritone
I must say that I have absolutely NO desire to be a part of the corporate environment. I'm too old, too crusty and too independent to be able to meld into cubicle hell.
While I have to play the game to some extent - virtually all of my work comes from big corporations including Countrywide, Wells Fargo, Chase, etc. - I have the luxury of working out of my home, more or less setting my own schedule. I don't go to meetings. The greatest "penance" I suffer is taking required class work to maintain my license.
Nevertheless, I suppose there are those who would think me a hypocrite - biting the hand that feeds. But, then, there's the rub. As they say at "Rallys" - Ya gotta eat!
I've chosen not to be an ascetic, a "back to the lander." While that had some appeal for me, it just didn't offer enough of the things I cater to in life. So I earn a living primarily from the corporate world. I just keep myself at least one step removed from it, so I can sit at my computer in my basement - in my underwear if I choose (it's not a pretty picture,) and work well removed from the hive.
As we go through life, we all tend to find our niche. I am just enough of loner and an iconoclast that I don't fit into the mold cast for the majority of folks.
By the way Clav. I don't suggest that all the rich should be done away with. Many rich folks do very well by those less fortunate. But there also many who don't. While legally, it is anyone's option to be altruistic or not, from a moral or ethical standpoint the Scrooges of the world are not highly regarded and ultimately may pay for their avarice. Most probably won't. They'll just die with all their riches stuffed into their coffins. But again, sometimes, the hoards just might come a callin'.
B-tone
22 - P.Marlowe
Dave... I applaud your successes. You're obviously a person with a strong moral/ethical core.
When insisting that this unmitigated greed be crushed I am not implicitly suggesting some bizarre form of communism. Someone earlier suggested, rude tongue firmly in cheek, that we all "go kill the rich" and take their money.
That doesn't work and has never worked. All that happens is that you replace one group of legalized thugs with a (soon) new group of legalized thugs...
THERE'S NOTHING WRONG with wealth. There better not be - because I'm working my ass off to attain it...
But there is something VERY wrong with a society that rewards/allows grotesque amounts of wealth to someone while the very workers he depends on are barely making ends meet. (The arch-conservative rhetoric that it's a "free market" and said employee can march down the street and MIRACLE OF MIRACLE find a job in the same industry - or some such that he/she can match his or her education/training skills and be paid loads more is just a flat out LIE.)
There is something wrong in a society where those with the means and the political/economic powers continue to suck the wealth right out of the country, out of the middle class, out of the government in general - leaving us with an ever shrinking middle class, an infrastructure that has been falling apart for decades, an non-existent health care system for a population that is nearly DOUBLE that of Canada...
There is NOTHING wrong with attaining wealth Dave... There is EVERYTHING wrong with INSATIABLE GREED.
Marlowe
23 - bliffle
Dave sez: "Les, there are LOTS of CEOs - by far the majority - who can see the line between greed and fair profit, and live by at least some standard of ethical conduct. Some highly publicized negative examples"
Uh, Dave, they all died in the 70s. I know, because I worked for some of them.
It is utterly naive to believe that CEOs pursue profits: they do not and haven't for 30 years. Executives, like shareholders, seek to increase cap value, i.e., share price. they sometimes use 'profit' as a lure for share buyers, especially when a company is overripe, e.g., GM which, while faced with failing sales and $400billion debt uses $5billion dividends to prop up stock price.
Since the 70s CEOs have pursued stock price, not profit. In fact, profitability (for a large corp) became the mark of a poorly managed company. To make up for an unfortunate profit they would often acquire an unprofitable company as compensation, whereupon their corp taxes would go to zero and the CEOs Revenue Bonus would go up. How neat!
Since the 90s the goal of CEOs has shifted to Personal Risk Avoidance, i.e., for the CEO and his cronies on the BoD to win no matter what happens. If sales go up they win Revenue Bonuses. If sales go down they cut employment and get Cost Bonuses. They can't lose. But other people can.
the childish notion that CEOs pursue 'profit' is simply laughable and should be abandoned.
24 - Les Slater
Bliffle,
"the childish notion that CEOs pursue 'profit' is simply laughable and should be abandoned."
Not so fast. First of all, all corporations must ultimately make a profit, or else they fail. I watch the stock market. It is quite speculative and it may seem, at times, there is no relationship between profits and stock price. But those that consistently don’t make a profit, are hemorrhaging resources, eventually get dumped. Some have turned a profit by increasing market share, at a loss, selling stock to finance it. It doesn’t work forever. Amazon is a good example. A company, if well funded, can lose money for an extended time, IF …. IF, they can convince stockholders that they WILL turn a profit ultimately.
The management sets up all sorts of schemes, hedges if you will, so THEY can’t lose. But it is generally their job to make the company profitable. There are specialty jobs like getting a company, or division, ready to sell, spin off, raid pension funds, etc. Ultimately the stockholders want to see profitable results. Even the technicians ultimately depend on profitability.
Profitability can go up or down. Stocks do too. Big money can be made on shorting. Either way, money can be made. It is speculation.
Again, a company must make a profit, or it will ultimately fail.
Les
25 - Les Slater
Mr. Mozilo. Isn't he still getting royalties from Firefox too?