bank run blog

The Associated Press is reporting this morning that Wachovia has sacked its CEO :

“Wachovia Corp. chief executive Ken Thompson was pushed out Monday as head of the nation’s fourth-largest bank, becoming the latest financial services executive to be ousted amid turmoil in the U.S. housing market.

Thompson joins Stanley O’Neal at Merrill Lynch & Co. and Charles Prince at Citigroup Inc., who both presided over huge losses from exposure to bad mortgages, and were subsequently forced out from their perches at the top of Wall Street institutions.”

full story

In a separate but related story, the AP is also covering a major shakeup at WaMu :

“Washington Mutual Inc. said Monday Stephen Frank will assume the title of chairman of the board, while Kerry Killinger will remain as chief executive of the thrift.

The separation of the chairman and CEO roles is part of a new governance plan Washington Mutual will put into place July 1 in an effort to improve the company’s operations and return it to profitability.”

full story

Countrywide CEO Angelo Mozilo inadvertently allowed the public a glimpse of the corporate culture this week when he replied directly—and derisively—to a homeowner who had asked for a renegotiation of his mortgage to avoid foreclosure. The Los Angeles Times reports :

“Apparently clicking ‘reply’ when he meant to hit ‘forward,’ Countrywide Financial Corp. Chairman Angelo Mozilo ignited an online furor Tuesday by describing a mortgage customer’s plea for help as a “disgusting” example of form letters inundating the Calabasas home lender.

Mozilo’s e-mail rocketed back to the customer, Daniel Bailey Jr., who had asked Countrywide to modify the terms of his loan so he wouldn’t lose his home of 16 years.”

The Guardian’s coverage of the same story referenced Mozilo’s public relations issues :

“Countrywide subsequently issued an apologetic statement: ‘Countrywide and Mr. Mozilo regret any misunderstanding caused by his inadvertent response to an e-mail by Mr. Bailey. Countrywide is actively working to help borrowers, like Mr. Bailey, keep their homes.’

But it won’t help Mozilo’s public image. The man, whose orange perma-tan has prompted comparisons with an Oompa-Loompa, was dubbed ‘America’s most villainous CEO’ by the gossip website Gawker. Others have simply taken to calling him ‘Mystic Tan’.”

Los Angeles Times :Countrywide Financial Chairman Angelo Mozilo’s e-mail sets off a furor

Guardian : A message straight from the top

The top two executives of failed mortgage lenders Countrywide are unlikely to face foreclosure, according to a CNN report :

“Countrywide CEO Angelo Mozilo is set to receive $10 million in stock, and President David Sambol will get about $9 million, according to documents Bank of America filed this week with the Securities and Exchange Commission.Countrywide CEO Angelo Mozilo is set to receive $10 million in stock, and President David Sambol will get about $9 million, according to documents Bank of America filed this week with the Securities and Exchange Commission.

Sambol will receive another $28 million in cash and stock to stay with the combined company, the document states.”

An Associated Press article on the same subject timidly touches on the social and political backlash that such stories are beginning to generate :

“The payments, described as “performance-based” stock rights and grants, are required by agreements the executives struck with Countrywide less than a year before the sub-prime meltdown forced the mortgage lender to sell itself, according to the filing.

Some lawmakers were incensed by the payouts.”

CNN : SEC: Countrywide execs to get millions in stock

Associated Press : Filing: Countrywide CEO to Get $10M

Congressional hearings this week focused on enormous CEO compensation packages, particularly at companies that have recently posted huge losses. The hearings were widely reported, in what some see as a precursor to an inevitable social backlash against the banking and financial sectors, as the true scope of the securities market collapse becomes more apparent. According to the Financial Times :

“Three top Wall Street figures at the centre of the mortgage crisis yesterday defended their compensation packages at a hearing in Congress.

Facing a barrage of criticism from lawmakers on the House oversight and government committee were Angelo Mozilo, chief executive of Countrywide, the embattled mortgage lender; Stan O’Neal, the former chief executive of Merrill Lynch; and Chuck Prince, former chief executive of Citigroup. They claimed their pay was received fairly and in line with investors’ interests.”

Mozilo came in for especially heavy criticism for his Enronesque foresight. The Los Angeles Times reports :

“Countrywide Financial Corp. founder Angelo R. Mozilo defended his fortuitous stock trades before a congressional panel Friday, denying that he had manipulated his trading plan to unload about $141 million in stock options before the company collapsed.”

Over the weekend, the Enron parallels multiplied for Mozilo, according to the Associated Press :

“Federal authorities are investigating Countrywide Financial Corp. for securities fraud, according to media reports.

The FBI is in the early stages of an inquiry into whether company officials misrepresented its financial position and the quality of its mortgage loans, The Wall Street Journal first reported Saturday, citing law enforcement officials and finance executives with knowledge of the development.”

Financial Times : Wall St defensive on compensation deals

New York Times : Congress Questions Executives on Pay

Los Angeles Times : Mozilo defends cashing in Countrywide stock

Associated Press : Reports: FBI Investigating Countrywide