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.In a few weeks thecompany was set to release third quarter earnings.Stock analysts upand down Wall Street were predicting that the loss could total well over$2 billion, just about wiping out Countrywide s profits for the prior year.On October 24, two days before the earnings release, rumors begancirculating that Mozilo might resign as CEO but remain as chairman.3In the morning Muolo from National Mortgage News on the East Coasttried the CEO at his Calabasas office.Even though he often was thereby 8 am California time, he wasn t there that morning.Muolo sent himan e-mail asking about his resignation.Two minutes later Mozilo called,angry. What the hell s going on? They re saying I m resigning? Who?I don t know where this stuff comes from.I m not resigning. He wasat the hospital visiting a sick family member.A few days later he decided to give the newspaper an on-the-recordinterview.Muolo asked him about Wall Street s role in the wideningsubprime crisis its insatiable appetite for subprime loans that couldbe securitized into bonds. It s easy to have hindsight, he said. No onesaw this coming.No one.Look at [Alan] Greenspan.The Fed increasedrates 17 consecutive times.Greenspan was testifying on Capitol Hill tell-ing people to take out ARMs.If you want to play the blame game, let sgo back and blame the Fed.A federal funds rate of 1 percent? When theStreet got into subprime there were virtually no delinquencies.Therewere no foreclosures and there was equity building in these homes.3On October 24 Countrywide filed notice with the Securities and Exchange Commissionrevealing that Henry Cisneros, secretary of the Department of Housing and UrbanDevelopment in the Clinton administration, had resigned from its board, saying he wantedto spend more time managing his home building related company, CityView.A directorsince 2001, Cisneros had sold $5 million worth of stock from 2004 to 2007.Even thoughthe SEC statement was dated October 24, the resignation was effective October 18.InMarch two other directors, Kathleen Brown of Goldman Sachs (and sister to formerCalifornia governor Jerry Brown) and Michael Dougherty, an investment banker fromMinnesota, announced their resignations. 256 chai n of b l ameIt was a classic bubble.You don t know when you re in a bubble.You canblame everyone from al-Qaeda to the rating agencies. Question: Are you sorry you ever got into subprime?Mozilo: I can t answer that.We have a stated mission to make adifference in the lives of American families, to get low-income peo-ple into housing.You don t know the stuff I ve seen.People have sentme photo albums, family albums, how happy they are to have a home. He paused for a moment. Look, he said. I have nine grandkids.Thereis too much division when you have haves and have-nots.You don thave peace in the world.I don t know if I would have done anythingdifferent. The reporter tried the Wall Street question again: Don t they sharesome of the blame for the growing crisis?The Countrywide founder didn t hesitate to answer this time. They were driven by our model [originating and securitizing thosesame loans].I didn t realize that they didn t know what they were doing.It got out of control.They were like We need more.We need moresubprime loans to buy. Remember back in the 1990s with 125 percentLTV [loan-to-value] loans? We didn t participate in that.But the Streetdid they securitized that crap. The next question was about loan brokers, but Mozilo declined totalk on the record about what he thought of these freelance salespeoplethat Countrywide had depended on for two-plus decades.His com-ments, rest assured, weren t exactly charitable.It could have been that hehad suddenly remembered the warnings of his late partner, David Loeb,who two decades earlier had cautioned about brokers: They re crooks. * * *Just about the time Countrywide announced that it was laying off10,000 to 12,000 workers, it embarked on an internal public relationscampaign to boost the moral of its employees, who not only feared los-ing their jobs but were barraged almost daily by the media about thelender s increasing problems.Even with the $2 billion investment fromBank of America, Countrywide s share price continued to slip, and theSecurities and Exchange Commission (SEC) in Washington had openedan informal investigation into Mozilo s insider stock sales over the Armageddon Times 257previous three years, which had brought him $300 million in proceeds.To the few reporters he was still talking to, including CNBC s MariaBartiromo and Muolo, he continued to defend his actions, noting thatevery option he had converted into stock and sold had been disclosedand done through a selling program called 10b5-1.However, the SECalso was examining a new program that he had put in place in October2006 that speeded up the pace of those sales.4 His explanation boileddown to this: He would be retiring within two years, and all his per-sonal wealth was tied up in stock. I m not worried about the SECprobe, he told Muolo.(Mozilo s base salary, though, wasn t exactly pal-try.At $23 million before options and bonus money it was amongthe highest in the industry.)The internal PR campaign was done in conjunction with Burson-Marsteller, a public relations fi rm that specialized in crisis managementat companies whose names were being dragged through the mud.It wasaimed at Mozilo s employees and involved dispensing green wristbandsthat said Protect Our House. To obtain one, employees had to sign apledge about their commitment to the company and agree to unflag-ging determination to tell the real Countrywide story the storyabout our 40-year mission of helping people. So went the com-mitment card sent to full-timers by Andrew Gissinger, the lender s chiefoperating officer.In one of Countrywide s Long Island branches, a loan officer hadthis to say about the wristband campaign: It s a joke.I m not signingit.I don t know anyone here who has. She tried to cut and paste thee-mail about the pledge and pass it on but was blocked from doing soby Countrywide s computer system.The loan officer said the companywas also putting the heat on its salespeople to increase originations ata time when home buying was waning in most markets. Over theweekend I m supposed to go out to 10 open houses and get the cardsof Realtors I m not currently doing business with, she said. Then I msupposed to log into our Countrywide server and populate the net-work.I m not going to do it.My kid has a game this weekend
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