All the Devils Are Here [20]
With his trademark tailored suits and crisp blue shirts with white collars—which accentuated his perfectly white teeth and dark skin—Mozilo would testify before Congress, give interviews to reporters, make speeches at conferences, and meet investors. He took great pride in the business model he had helped create; he had, indeed, “showed them.” By 2003, Countrywide was one of the best-performing companies in the country, with a stock price that had risen 23,000 percent in the twenty-one years since the start of the bull market that began in 1982. A glowing article in Fortune magazine noted that Countrywide had outperformed not just other mortgage companies and banks, but such storied stock market performers as Walmart and Warren Buffett’s Berkshire Hathaway. Mozilo would later describe the publication of that article as one of the proudest moments of his life.
At precisely the same time Mozilo was building Countrywide, another entrepreneur was building a different kind of mortgage empire. His name was Roland Arnall. He was never in the limelight like Mozilo, and he never wanted to be. But he made far more money; by 2005, he was worth around $3 billion, according to Forbes. Arnall got rich by making loans to the borrowers that had long served as the customer base for the hard-money lenders: people who had bad credit, didn’t make much money, or both. Though his companies never got the blame that would later be heaped on Countrywide, Arnall was the real subprime pioneer; in fact, his first company, Long Beach Mortgage, trained a slew of executives who would later go on to found their own subprime companies. “The Long Beach Gang,” housing insiders used to call them. One of Arnall’s subsequent companies was called Ameriquest. By 2004, it had become the largest subprime lender in the country.
A native of France, Arnall was born in Paris in 1939, on the eve of World War II. His mother was a nurse; his father, a tailor by trade, was in the army. Not long before Paris fell to the Germans, Arnall’s father returned to Paris and warned his extended family they should leave as quickly as possible. Most of them refused. But Arnall’s father took his wife and young son to the south of France, where they waited out the war using false papers that hid the fact that they were Jews. Arnall himself discovered that he was Jewish only after the war, a fact that stunned him. With the war ended, the family moved first to Montreal, where Arnall attended Sir George Williams College, and then, in 1950, to California, where Arnall sold flowers on street corners to make money for his family. “I know firsthand the precious gift of freedom,” he once said.
Arnall exerted a powerful effect on those who came into his orbit. “He was scarily smart and charismatic,” says Jon Daurio, who worked for Arnall from 1992, when Arnall recruited him to be the corporate counsel of Long Beach, until 1997. (Daurio would go on to found several other subprime lenders.) Daurio and his wife had dinner with Arnall when he was trying to convince Daurio to join Long Beach. “My wife is a lawyer, and smart,” says Daurio. “She said, ‘I don’t understand 90 percent of what you talked about, but you’re an idiot if you don’t go work for him.’”
Even more than Mozilo, Arnall was known for running his companies with an iron fist. “He was very demanding, and not very tolerant,” recalls a former executive. He had a penchant for enticing people to work for him, extracting what he wanted from them, and then losing all interest in them. “When he got what he wanted out of you, you were done,” this person added.
Unlike Mozilo, Arnall was extremely secretive. He never gave press interviews. The documents his companies filed with the SEC divulged only the bare minimum required under the law. Arnall did not attend industry conferences, and his name was never on the door of his companies. He hated