The Countrywide Civil Suit

On the brighter side, looks like Angelo Mozilo might get what he deserves.

Angelo Mozilo

The SEC announced a civil suit against Mozilo yesterday. The former Countrywide CEO will be slapped with securities fraud and insider trading charges. Investigators cite private e-mails from Mozilo, in which he called his new brand of mortgages “poison,” suggesting that Countrywide was “flying blind” — all while publicly talking up his biz as a lender of the highest standard. We can’t really blame him for selling $140 million worth of Countrywide stock, but evidently, the SEC also takes issue with the timing and methodology in which he sold it… another nail in his coffin.

Good riddance to Mozilo. We wish him the very worst. And if the SEC is declaring open season on corporate misrepresentation, we can think of a few old friends likely renewing their passports this morning: Fuld, Cayne and Thain, to name a few.

The FDIC is attempting a CEO shake-up of its own. Rumor has it that chairwoman Sheila Bair is pushing for the resignation of Vikram Pandit, Citigroup’s head honcho. Bair claims that Pandit is simply unsuited for the job… he’s got a background in the very investment banking model that got Wall Street into this mess, and Bair supposedly wants someone with consumer lending experience.

Between FDIC-backed debt issuance and cash infusions from the Treasury, the U.S. government has provided Citi with nearly $85 billion in assistance. Evidently, that’s enough money to buy Uncle Sam a say in who runs the show. We object to the whole premise of this shake-up — it’s a slippery slope of the highest order. But we hate to admit it… Bair’s got a point.

The Daily Reckoning