Countrywide Financial Corp.’s name is headed into the sunset, signaling that the once-formidable mortgage giant is now safely tucked into the Bank of America family of product lines.
But there’s still plenty of reason to believe that Countrywide and its once high-flying founder-CEO Angelo Mozilo will remain in the headlines.
For one thing, it’s clear that the federal government is taking a close look at Countrywide’s business practices and the hundreds of millions of dollars that Mozilo cashed out in stock sales before the company was rescued by Bank of America.
When our editor asked SEC Chair Mary Schapiro about Countrywide and the Bank of America transaction at the Society of American Business Editors and Writers annual conference in Denver on April 28, she declined to give specific comment. But she did concede that everything related to the mortgage meltdown is getting close scrutiny and she applauded the work of state attorneys general, who have taken Countrywide to task over its business practices.
In the case of Countrywide, which had large operations in Ventura County, and Mozilo, who owns a home in Santa Barbara, the public deserves a full account of its egregious compensation schemes and the quality of its disclosure to its shareholders.
Moreover, the public deserves a thorough explanation of what government agencies and regulators did or did not say to Countrywide and whether they nudged it into the BofA merger. Let’s not forget that before it became a poster child for mortgage excess, Countrywide dramatically expanded into the heavily regulated world of banking. Did the public shareholders know everything that regulators knew?
The SEC is in a unique but vulnerable position on this front. If banking regulators have grave concerns about the practices and capital structure of a publicly-traded company such as Countrywide, they must not be able to hide that fact from the investing public.
The current “stress tests” at banking companies are a disaster for the SEC because so much is going on behind a veil of secrecy that does nothing but add uncertainty to the process.
The SEC and other government regulators need to clear the air about Countrywide and then create better and clearer rules of the road for disclosure if Countrywide-like problems are going to be avoided in the future.