Five Dumbest Things on Wall Street about Subprime Mortgage Mess
Thank you, fellow taxpayers, for your generous contributions to the Angelo Mozilo defense fund. Bank of America(BAC Quote) confirmed on Tuesday it is covering the legal fees for the former Countrywide CEO who has been charged with securities fraud and insider trading. BofA, America’s biggest bank, says it is obligated to shell out for Mozilo’s defense as a result of an indemnity clause in place when he ran Countrywide.
The Securities and Exchange Commission filed civil charges against Countrywide’s co-founder last Thursday, alleging he raked in more than $139 million of improper profits by exercising stock options in 2006 and 2007 while the nation’s housing market and Countrywide’s finances were collapsing.
Now Bank of America, which accepted $45 billion from the U.S. government’s Troubled Asset Relief Program, is picking up the tab to defend one of the key players in the subprime mortgage mess that created all those troubled assets.
Excuse us for being blunt (and clearly rhetorical), but have our lawmakers lost their minds?
Mozilo made $139 million in just two years selling subprime loans. He can surely afford his own legal team. In fact, he’s probably better capitalized than Bank of America which even after passing a stress test is still unable to function without the assistance of John Q. Public and his wealthy Uncle Sam.
The Obama Administration has no problem trampling on contracts in order to get what it wants, just ask GM(GMGMQ Quote) and Chrysler bondholders who were stiffed of their rightful due in favor of the politically powerful UAW. Likewise, Congress bowed to public pressure to unfairly – and perhaps unlawfully – tax AIG(AIG Quote) executives out of bonuses they legally, however undeservedly, earned.
As for the Supreme Court checking and/or balancing the frightening power grabs of Washington’s other two branches of government, well, to quote their lame excuse for bowing out of the Chrysler case, “they have not carried that burden.”
If that’s the way Washington wants to play it, then we say the government should force Bank of America to call off all bets with Mozilo and let him pay his own freight.
Mozilo made a fortune passing around admittedly “toxic” pieces of paper. In this, of all cases, the American taxpayer should not be footing the bill for an equally poisonous piece of paper he calls a contract.
