I recently read an article by Sharon Smith on the Socialist Worker website. It contained the following information:
- A dozen former executives from mortgage lender Countrywide (which is also now owned by BoA), whose predatory lending practices played a key role in precipitating the sub-prime mortgage crisis, have launched a new corporate entity, the Private National Mortgage Acceptance Company–with a strategy to make exorbitant profits from individuals unable to keep up with their monthly mortgage payments.
Known as PennyMac, the company buys overdue mortgages at steep discounts from the federal government, which took them over from distressed banks. PennyMac then contacts the homeowners to negotiate new terms–and either pushes them into foreclosure or negotiates lower interest rates. It’s a win-win equation for PennyMac.
One of PennyMac’s leaders, Stanley L. Kurland, is a former president at Countrywide and an architect of the classic sub-prime mortgage formula–mortgages with low “teaser” interest rates that later rose sharply. During the six years before Kurland left Countrywide in late 2006, Countrywide’s portfolio increased from $62 billion to $463 billion. Kurland sold $200 million in stocks shortly before leaving Countrywide. Now he stands to make many millions more reaping profits from the same category of people whose lives he helped to destroy.
Federal banking officials nevertheless defend recruiting executives like Kurland to rebuild the financial system. As the New York Times explained: “[Federal officials] said that it was important to do business with experienced mortgage operators like Mr. Kurland, who know how to creatively renegotiate delinquent loans.”
It so happens that I once had a temp job working for Countrywide. (I didn’t last long, I’m proud to say.) I worked at an office they had in L.A. It was located at the foot of the beautiful Santa Suzannah mountains, where a small nuclear reactor melted down in 1959 (but that’s another story). I was hired along with about thirty other temps. We had to go through a week-long training course before we could start work. At one of the these training classes, a high-level executive came to talk to us. She told us quite frankly that Countrywide got all of its income from charging fees for late mortgage payments. (I will never forget the look of glee on this woman’s face as she explained this to us.) Perhaps I was in a state of denial, but it was only after I left this job that I began to put two and two together. If this was their sole source of income, then they had to be luring people into buying mortgages that they couldn’t really afford. People who have difficulty making their payments are likely to default sooner or later. What Countrywide was doing was unsustainable, just as a Ponzi scheme is unsustainable.
Countrywide was a purely parasitical organization. In my opinion, what they did was on the same level as what Bernie Madoff did. The only difference is that what Countrywide did was legal, while what Bernie Madoff did isn’t. Stanley L. Kurland deserves to be in prison just as much as Madoff does. Instead, the Obama administration is looking to him, and others like him, to help revive the economy.
The Spanish Prisoner 