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Quite the World, Isn't It?

The housing collapse, Mozilo and justice averted

For the past couple of days the story of Angelo Mozilo's rise and fall -- and the nation's economy along with it -- has been nagging at the back of my mind (Facebook friends already saw an earlier post about this). Thealign="left"> Sunday New York Times recapped the case against Mozilo, one of the founders and a propelling force in the now-defunct Countrywide Financial, which rode toxic mortgages to massive profits before it fell apart.

The story portrays a CEO who knew his company was pursuing policies that not only put the firm at risk, but also imperiled the financial well-being of the people to whom it was giving mortgages. In internal emails Mozilo expressed his fear about the practices to his top deputies.

Rather than halting the practices, Mozilo set up an auto-sell program for his personal shares of Countrywide, so while he was publicly pushing a rosy view of Countrywide's financial health and future, in private he was cashing in while there was still money to be had.

Where this moves from crass to appalling is the Securities and Exchange Commission filed civil charges against Mozilo accusing him, among other things, of pocketing $140 million in illicit gains from those insider deals. The settlement? He agreed to pay $67.5 million, of which Bank of America, which bought Countrywide as it collapsed, is paying $20 million (and covering Mozilo's legal bills). You'd think the BofA stockholders would be outraged. Even though Mozilo helped destroy Countrywide, the BofA investors are now paying $20 million of his settlement.

So a CEO who knowingly profited from illegal trades and steered his company into disaster -- he could see the shoals coming -- walks away from the charges against him pocketing nearly $100 million from those illicit gains (at least as the government prosecutors saw it).

Exactly why does the SEC think this is a good resolution? At a time when families who let themselves be sucked in by Countrywide's marketing are losing their homes, and their life savings, their federal government agrees to let one of the key manipulators walk away with nearly $100 million.

What a disgusting, and indefensible, turn of events. I hope the public backlash from this is long, and loud. But I suspect it won't be, because in the end this kind of miscarried justice is the norm, rather than the exception. We have come to expect little justice from our judicial and regulatory systems, and we continue to get it.
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