Countrywide CEO foregoes plush payoff package–but don't feel too sorry for him

By Martin Bosworth

Why is this man smiling?

Angelo Mozilo, the well-tanned and always smiling soon-to-be-ex-CEO of failed mortgageangelo_mozilo.jpg lender Countrywide, announced today that he would magnanimously give up his massive severance package for running his company into the ground and being bought out by Bank of America:

“My primary focus today — as it has been for the past 40 years — is to do what is in the best interests of Countrywide’s employees, customers and shareholders,” Mr. Mozilo said. “I believe this decision is the right thing to do as Countrywide works toward the successful completion of the merger with Bank of America”…Mr. Mozilo would be entitled to $36.4 million in cash severance pay and $400,000 per year in consulting fees, as well as private airplane use and other perquisites. These are the amounts and benefits he will be forfeiting.

It should come as no surprise, of course, that Mozilo thought nothing of accepting such a ridiculously ostentatious gift bag even as his company was teetering on the verge of bankruptcy from its heavy investment in subprime mortgages and subsequent rising foreclosures. Indeed, the only reason Mozilo is giving the pay and perks up at all is because the House Oversight Committee and the Securities & Exchange Commission are taking a skeptical look at lavish CEO compensation packages in general, and his in particular.

And lest you think Mozilo will be on the welfare rolls by next year, fear not–he’s still walking away with retirement funding and deferred compensation totaling $40 million or so. Oh, the horror! How will he show his face at the country club now?

The Fine Art Of Money has a great roundup and timeline of the slings and arrows of outrageous fortune that The Tanned One has benefitted from over the years, particularly thanks to the housing boom of 2000-2005, when Mozilo led the charge in giving credit and loans to anyone with a pulse, and making sure their names were on the dotted line before ever reading the fine print.

And how’s that worked out? Not so well for homeowners, it seems:

Purchases of new homes in the U.S. unexpectedly fell to a 12-year low in December, ending the worst sales year since records began in 1963 and signaling little prospect for a recovery. Sales decreased 4.7 percent to an annual pace of 604,000, the Commerce Department said today in Washington. The median price dropped 10 percent from December 2006, the most in 37 years. The dollar extended its drop as the figures spurred speculation the Federal Reserve will keep reducing interest rates. The report may also reinforce concern that declining home prices and stricter lending will lead to more foreclosures and hurt consumer spending.

As homeowners rush to refinance into fixed loans and the Fed plans to cut interest rates to the bone in order to spur spending and avoid recession, Angelo Mozilo is–even without his lavish severance package–quite literally smiling all the way to the bank. And all he had to do was help wreck a country’s economy to do it, and get clean away with it. Nice work if you can get it.

Why is this man smiling? Wouldn’t you be?

12 replies »

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  2. That’s one of the scarier tans I’ve seen since the last time I saw George Hamilton on screen. And the smile makes me think his face is about to crack in half.

    Something in that photos is seriously creepy….

  3. I don’t kid myself that he’s a saint, but I’m glad he’s doing it, anyway. Doing the right thing for the wrong reasons is better than doing the wrong thing, huh?

  4. Several months ago, I saw him on CNBC, and noticed his tan. That tan pushed a button with me, and I did some research on the stock. I ended up shorting the stock (right before the sub prime meltdown), and it turned out to be one of my best trades of the year. I’ve always found indicators to guide me in the market, and now I can add the “Suntan Indicator” as another tool in my trading toolbelt.

    BofA is going to have a lot of trouble digesting Countrywide (CDC), as it’s derivative exposure is an unknown quantity, and is probably somewhere north of 40 billion dollars


  5. Jeff – isn’t it really only an indicator if it works regularly? Unless you’ve seen this with other CEOs or VIPs, your sample size is only one – hardly enough to draw anything resembling a statistical result.

    On the other hand, if it’s just a gut feel, well, so be it.

  6. Brian: I don’t know if we have a representative sample or not, but based on my own past experience I’ll say that any indicator that a CEO is living the high life is enough to make me at least do some checking. And that guy must spend a couple hours a day in the tanning booth….

  7. Brian, This wasn’t a sample of one. I’ve seen this indicator before, and back in the 80’s actually quantified the stock price vs. the excessive tan of the CEO. However, that being said, I carefully researched the company, looked at it’s trading action (the tape never lies), and decided that CFC was going over a cliff. It was my patriotic duty to short the stock:)

    I wrote extensively about the CFC trade over in my blog. Despite the fact that it was a great trade, I covered my short way to early when the White House made the sub-prime deal and CFC went up 20% on an opening, with a volume of over 130 million shares traded that day. Despite the fact that CFC fell later, even after the BofA offer, I did the right thing getting out when I did. Still, my position was big enough that it took three trades to get out of the whole thing. There are many valid indicators one can use for the markets that seemingly have nothing to do with the market itself. I used other non market indicators to determine that Enron was going belly up, and was able to get off a decent short position on that stock. Sometimes, you just gotta think outside the box.


  8. While Skilling and Lay deserved to be drawn and quartered, for me to do anything to physically harm anyone would be totally out of character. Karma is a bitch, Lay got his, and there’s a special place in hell for Skilling.


  9. It’s like porcupines crawled on to their heads, died, and bled orange ink. I hail from the state in question, and even I’ve never seen cobaggery like this. 🙂