At Countrywide's End, an Emotional CEO
A subdued Angelo Mozilo got choked up at the last shareholder meeting for Countrywide Financial (CFC). Nearly 70% of Countrywide shareholders approved the firm's sale to Bank of America (BusinessWeek.com, 1/11/08) at the June 25 meeting. The deal—now valued at $2.8 billion—is expected to close July 1.
Mozilo, a butcher's son who co-founded Countrywide nearly 40 years ago, called the event "clearly an end of an era" and promised Bank of America (BAC) shareholders they would "reap the benefits of what we have sowed." At one point Mozilo got emotional, reached for a water bottle and said "Excuse me, this is one of the drawbacks to being Italian." Then after taking a drink, he added, "the only one." At the end of his speech Mozilo received a short and somewhat hesitant standing ovation from the few hundred people in the auditorium, most of whom appeared to be Countrywide employees.
Security was extremely tight at the event, held at Countrywide's campus-like headquarters in suburban Calabasas, Calif., northwest of Los Angeles. Security guards in dark suits and earpieces roamed the premises. Shareholders were asked to show identification before entering the small auditorium where the meeting was held. A memo sent to shareholders prior to the meeting said no cameras or sound equipment would be permitted, there would be no question-and-answer session, and "If any attendee becomes disruptive…we will ask Countrywide security to escort the attendee from the meeting." Mozilo entered the auditorium quickly from the side of the stage just before the meeting began.
Proud of Its Accomplishments
Countrywide has come under fire from housing advocates, members of Congress, and shareholders for making aggressive loans to borrowers even as top management made tens of millions in profits from stock sales. The morning of the meeting, the Attorneys General of California and Illinois filed separate civil suits against Mozilo and Countrywide, alleging the firm used deceptive tactics to push homeowners into complicated, risky, and expensive loans so the company could sell as many loans as possible to third-party investors.
Mozilo, his dark bronze skin contrasting sharply with his white hair and shirt, gave a short speech as the votes were being tallied. "Despite widespread and often unfounded headlines of the past year, Countrywide has made a positive impact on the country," he said. He recounted how the company had invested early in new technologies that made mortgage processing quicker and more efficient. He said Countrywide was the first to open loan stores nationwide, the first to pass $500 billion in loans made in a single year, and the first to pass $1 trillion in loans being serviced.
He said Countrywide was the largest provider of mortgages to minorities and that some 22 million people had been able to buy homes thanks to the company. He said that in the past year Countrywide was a leader in restructuring troubled loans for borrowers, keeping some 143,000 people in their homes through loan modifications and other means. "I'm very proud of our accomplishments," Mozilo said. "We've made the dream of home ownership available to everyone regardless of ethnicity. We've helped millions of people in good times and bad."
End of the Monoline Firm
Mozilo thanked members of Countrywide's board, his now deceased co-founder David Loeb, employees, the company's soon-to-be ex-President David Sambol, and Kenneth Lewis, Bank of America's chief executive. Mozilo said he had gotten his first $75,000 loan to start Countrywide from Bank of America. "I've come full circle," he said.
Mozilo said that for more than a century, institutions specializing in mortgages had provided home loans. In 2007, Countrywide originated $408 billion in new mortgages. It collects and processes payments on a $1.5 trillion portfolio, nearly one-sixth of all mortgages in the U.S. At its peak, Countrywide had more than 1,000 offices and 15,000 salespeople. Countrywide's passing means the end of such "monoline" firms, in favor of more diversified institutions, Mozilo told shareholders. In the future, he said, "the business of mortgages will be housed within a banking protocol." He concluded by telling shareholders that he had often told employees not to fear change. "It's not only change that must be embraced," he added, "but the inevitable treated equally."
Shareholders Left Wanting More
The entire meeting lasted barely 18 minutes and guests were promptly escorted from the meeting room. The haste of the event left some shareholders disappointed. "It would have been nice to give shareholders a little more meat," said William Rehwald, an investor from Santa Monica, Calif. "Tell us what the synergies are. Pitch the sale."
Scott Adams, a regional coordinator with the American Federation of State, County and Municipal Employees's pension fund, came prepared with a speech he did not get to read. Adams said the union had unsuccessfully pushed for resolutions giving shareholders the ability to vote on executive pay packages. Adams scoffed at Mozilo's claim that Countrywide's efforts had kept 143,000 troubled borrowers in their homes. "He said they made 22 million loans; 143,000 is not a whole lot," he said.
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