The New Yorker recently had a great article on Countrywide and Angelo Mozilo. Unfortunately I can't link to the article, but it was in the June 29, 2oo9 issue and was written by Connie Bruck of The Predator's Ball fame. I thought the article was fair and I came way with more sympathy and respect for Mozilo (although it is hard to feel too sympathetic for a guy spending his days at his home along the exclusive Lake Sherwood Country Club). I just heard a congresswoman, Michele Bachmann, on CNBC blaming the whole financial crisis on Fannie Mae and Freddie Mac. But this paragraph from The New Yorker stood out when I read the article and I was reminded of it again listening to the congresswoman:
Mozilo and some of his executives believed they were in a new era, in which limits had become obsolete. In 2001, the Federal Reserve began cutting interest rates dramatically, bringing them to their lowest point in forty years, and fuelling a boom cycle, particularly for mortgage lenders. And Countrywide had a ready market for its enormous volume of mortgages in Wall Street, which supplanted Fannie Mae as the country's biggest buyer. "We frankly can't produce enough product for that market to be satisfied," Mozilo commented in April, 2003.I will readily admit that Fannie and Freddie played a part in the housing boom, heck they were formed to buy mortgages, but it is naive to think the whole blame falls at their feet. The real bad stuff never went to Fannie and Freddie because their standards did not allow it. The toxic junk that started the implosion went to Wall Street-designed mortgage backed securities. When this junk failed, the collapse quickly spread to other mortgage products and exposed the lax lending standards and disregard for risk of the mid-2o00s.