All the Devils Are Here [137]
There is little question that the money, and the accolades, had come to matter too much to Mozilo. And yet it’s unclear whether Mozilo was, in fact, trying to deceive Countrywide’s investors, or whether he was so desperate to win the market share battle that he simply couldn’t see the ultimate cost of the bad loans Countrywide was making. He remained, quite simply, the truest of true believers, both in his company and in the transcendent virtue of subprime loans Countrywide made. He used to say that if 10 percent of subprime borrowers defaulted, that meant 90 percent were paying their mortgages on time, every last one of them a borrower who wouldn’t have otherwise had a shot at the American Dream. “Angelo, he totally believed,” says a former executive. “He’d say, ‘When I look a homeowner in the eye, I can tell if they’ll pay.’ We’d say, ‘Angelo, we don’t even do a personal interview anymore—would you stop saying you can see it in their eyes?’”
As for Countrywide, Mozilo was convinced that it had become so big and so strong that it was impregnable. By 2006, it ranked 122 on the Fortune 500, with $18.5 billion in 2005 revenue, $2.4 billion in profits, and a mortgage origination engine that had generated a staggering $490 billion in loans. Surely, a company with that kind of financial might could weather even a severe housing downturn. It might even help Countrywide in the long run, by putting some of its subprime-only competitors out of business. During an investor presentation in 2006, Mozilo read the names of some of the companies that had exited the business: Great Western, Home Savings, Glen-Fed, American Residential, and others. “These are the very ones that equity analysts told me that I should be fearing... all gone,” he said. “And ten years from now when we read this list, you’ll see that most of the players today will be gone. Except for Countrywide.”
Yes, Mozilo saw that Countrywide was making some risky loans, but what he didn’t see—what he couldn’t see—was that these loans could make his company every bit as vulnerable as the competitors he disparaged. “If you’re a true believer, you can ignore things you shouldn’t ignore!” says one former Countrywide executive. “That was Angelo Mozilo’s problem.” Another puts it a little differently: “He’s a great salesman, and great salesmen are often the guys who get sold.”
Mozilo had long planned to retire from Countrywide at the end of 2006. He was approaching seventy years old, and he had been in the mortgage business, in one way or another, for over fifty years. Although he still held the title of CEO, he was no longer involved in the day-to-day realities of running the business, thanks in part to his undisclosed health problems. His trusted lieutenants, with whom he’d built the company, were taking charge, starting with Stan Kurland, who was his designated successor. A transition had been set in motion.
But in 2005, Mozilo began to feel better. As he regained his health, he became less sure he wanted to leave the company he often called his “baby.” Another executive recalls a conversation he had with Kurland around then. “You realize I run this company,” Kurland said to this person. “Angelo doesn’t know any of the details.” A few weeks later, this same executive was with Mozilo, who said abruptly, “All Stan is interested in is the hedging reports,” referring to the ways in which Countrywide hedged its interest rate risk. “All he does is the daily hedge. He really doesn’t want to run this company.”
Executives at Countrywide noticed another change, too. Decisions had always come from Angelo and Stan; now they came from Angelo, Stan, and Dave—Dave Sambol.
At the same time, Sambol and Kurland were increasingly disagreeing about key aspects of Countrywide’s strategy. With the Fed tightening interest rates, Kurland, fearing its effect on the housing market, wanted to pull in the horns a little, say several former executives. Sambol wanted to keep gunning