Countrywide Financial and its former, now-vilified CEO Angelo Mozilo are synonymous with the greed and fall from grace associated with the financial crisis.
After Bank of America (NYSE: BAC ) took a $2 billion preferred stake in the nation's largest mortgage originator in the summer of 2007 and before B of A ultimately acquired the company outright, Mozilo sat down with CNBC's Maria Bartiromo for an interview riddled with irony, delusions, and surprisingly, prophecy. Following is the clip, as well as time stamps marking such comments.
0:11: Bartiromo mentions that she and Mozilo are sitting on Countrywide's trading floor. Many forget that Countrywide had aggressively expanded its capital markets segment during the height of the leveraged excess.
0:29: Mozilo acknowledges that Bank of America initiated the discussion and contacted them.
0:43: It's revealed that the Bank of America and Countrywide relationship dates all the way back to 1969!
1:08: Bartiromo: "Obviously this is a very attractive piece of paper for Bank of America." I think Bank of America shareholders would probably disagree with that in retrospect.
1:24: Mozilo: "For Bank of America ... to come into Countrywide, do their due diligence, extensive due diligence -- very professional team, and come away saying, 'We like what we see, and we want to invest $2 billion' is a great endorsement."
1:37: Mozilo calls Countrywide "one of strongest and best run companies in the country."
1:47: Mozilo: "Things were being said about Countrywide which were just not true." Mozilo is referring to these comments, which were ironically made by a Merrill Lynch analyst earlier in the week:
If enough financial pressure is placed on Countrywide or if the market loses confidence in its ability to function properly, then the model can break, leading to an effective insolvency. If liquidations occur in a weak market, then it is possible for Countrywide to go bankrupt.
1:55: Mozilo: "For a long-term shareholder, this is the best deal in the world -- for long-term shareholders of Countrywide." This statement turned out to be quite true for Countrywide shareholders -- the ultimate acquisition by Bank of America helped the company avoid possible bankruptcy.
2:37: Mozilo calls the Merrill Lynch analyst's behavior "irresponsible" and "baseless."
3:31: Appearing unfazed by the bankruptcy comments, Mozilo proclaims that there's "no more chance for bankruptcy today for Countrywide than there was six months ago, a year ago, two years ago ... we are a very solid company."
3:59: CNBC lists five mortgage lenders on a stock screen: Thornburg Mortgage, Accredited Home, Countrywide, Novastar Financial, IndyMac. All five eventually either declared bankruptcy, were acquired, or discontinued mortgage operations.
4:27: Mozilo on what drives the Federal Reserve to act: "Their tendency is to work off of data, and data always tells you what happened; it doesn't tell you wants happening." This is Mozilo's most enlightening statement of the interview. Long-term investors and Fed-watchers would be wise to remember these words.
5:00: Mozilo admits that "some of the loans that were made in that five-year period should not be made going forward."
5:45: Mozilo on the market panic: "What's driving this is form; it's not real ... but form has become substance." One of the main drivers in the credit markets is confidence, an abstract factor, but one that can ultimately be the most powerful factor.
6:44: CNBC flashes a screen on the "Big 5" banks, including Wachovia before it was acquired by Wells Fargo. Long-time Bank of America and Citigroup shareholders cringe at the sight of share prices of $51.75 and $464 (adjusted), respectively.
7:09: Mozilo on why Countrywide relies on short-term funding and his vision: "Most of our business is not done in the bank; it will be, but it's not done in the bank now." Countrywide was aiming to attract a larger deposit base to reduce dependence on the short-term credit markets. If the credit crunch would have been delayed a few years, perhaps Countrywide and Mozilo would still have been thriving in the recent refinancing boom. One can only wonder.
7:51: Mozilo on the failure of other firms: "We're a survivor."
8:10: Mozilo on the mortgage origination market: "At the end of the day, we're the only game left in town." I think Wells Fargo, which owns roughly one-third of the origination market today, would disagree with that assessment.
8:19: Mozilo correctly acknowledges that housing will take the U.S. economy into recession.
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