It was their admission of it and then their audacity to continue to commit those crimes. HSBC was underpunished. HSBC did not cooperate with Jacobson on her documentary.
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In response to the scandal, HSBC has significantly strengthened its compliance programs and appointed an external corporate monitor. Despite the heavy financial penalty for HSBC following the scandal, eleven banks have incurred higher fines than them during the last decade.
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Sign Up Log In. Home Entertainment. By Tom Teodorczuk. Comment icon. In , Countrywide became the first mortgage lender to sign a fair-lending agreement with the Department of Housing and Urban Development. Eventually, subprime loans became too attractive a business for Countrywide to resist. In September, , it created a new subsidiary for these loans, called Full Spectrum Lending; if the loans performed poorly, the Countrywide brand would not be tarnished.
There was a wide variety of borrowers out there, but they all, within reason, needed to be serviced. So why not make them a loan and charge them a higher rate?
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He wanted to have a product set that would serve everybody. In some ways, Countrywide seemed to be moving closer to the big companies whose methods Mozilo had scorned. He proposed reviving the use of a commissioned sales force. Anderson knew that challenging Mozilo was a dangerous proposition. In , Mozilo had instructed his managers to cut costs, and Anderson wrote a memo suggesting that several branch offices be closed.
Mozilo had summoned him to the boardroom, where he rolled up the memo and, brandishing it, berated Anderson, saying that closing an office was a public acknowledgment of weakness. Then he left the room, telling Anderson to wait there. Hours passed.
Eventually, Anderson learned that Mozilo had left the building. In , Loeb was seventy-six, and was suffering from neuropathy. Mozilo was tired of waiting to assume full control, according to a company insider, and he and Loeb quarrelled. Loeb was dying, and Mozilo went to see him.
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He later told friends that Loeb said that he was proud of him—something that he had never said in the forty years they had worked together. By , Countrywide had become a leading U. Where you have forty-seven per cent Hispanic homeownership, that is where the economic opportunity is. For Mozilo, market share had become an imperative.
In , he and his senior executives held a series of strategic-planning sessions with Eric Flamholtz, a U. Flamholtz told them that, if they expanded their market share, analysts would raise their rating of the stock. He argued that most industries eventually evolve into classic oligopolies, with one company commanding more than forty per cent of market share, a second controlling more than twenty per cent, a third having ten per cent, and the rest being boutiques.
That year, Countrywide had a market share of almost ten per cent, and no one in the industry had more than thirteen per cent. Mozilo liked the idea. In subsequent sessions, the executive committee agreed on a private five-year goal of about thirty per cent. Mozilo and some of his executives believed they were in a new era, in which limits had become obsolete. In , 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.
Mozilo replied that he believed thirty per cent was a realistic goal. Why did you announce it? I had said that he should announce about twenty per cent less than his goal actually was. This way, there was no slack. He had joined Countrywide in and become the head of production in , when he was forty.
Extremely smart, dogged, determined, just a relentless negotiator, driven to make money. As Countrywide widened its guidelines, and because of the intensity of competition with other lenders, Krsnich argued, the company was not being adequately compensated for the risks it was taking. In executive-committee meetings, Krsnich challenged the thirty-per-cent market-share goal. Why, he asked, was it so important to dominate every other lender in the market—what more did they have to prove? He invited Krsnich to attend. According to several former executives, Krsnich became frustrated, feeling that Sambol was exceeding his authority.
The exchange grew heated. By , Krsnich, a student of boom-and-bust cycles, was telling colleagues that he thought the company should prepare for a possible collapse in the mortgage market. As homes kept rising in value, owners could refinance their mortgages or take out home-equity loans. Some refinanced a few times a year, taking cash out of their homes to keep making mortgage payments, or to pay down other debts.
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Investors, meanwhile, were paying more for mortgage-backed securities and C. The rating agencies were paid for their appraisals by the banks that issued the securities, and the entire construct was based on the assumption that home prices would continue to rise. Some financial analysts outside Countrywide were also warning of a housing bubble, but Mozilo was not persuaded. Through and , home prices continued to increase, driven in part by the unprecedented access to financing.
Some loan types were supposed to be offered only to borrowers with high credit scores; but often credit scores were inflated, because people had avoided defaulting on their credit cards or other debt by refinancing their homes. As the S. Mozilo now saw the sales force as key to gaining market share, and it became increasingly powerful.
Stationed across the country, salespeople would see products and prices offered by other lenders, and notify their superiors that they needed to offer them, too. Subprime loans were especially lucrative for Countrywide, because Wall Street wanted the riskier, higher-yielding loans, and salespeople were paid larger commissions for originating them. There were no ceilings to these commissions, and many salespeople were making millions of dollars each year. According to a former Countrywide compliance officer, some borrowers who could have qualified for prime loans were steered into the more expensive subprime loans instead.
Stan Kurland was to succeed Mozilo asC. Like Mozilo, Kurland had been waiting a long time to gain control of the company. But now that his ascension was set, his influence seemed to wane. In early , with interest rates steadily rising, Kurland sent a memo to senior managers, saying that the boom was plainly over, and that it was time for the company to tighten its guidelines and plan for reduced volume.
His memo was ignored. The two men were very different. Kurland was mild-mannered and analytical, with a laconic demeanor that masked strong emotions; Sambol was arrogant, volatile, and uninhibited. Under the existing system, banks may choose their own regulators, which in turn are funded by the fees that the banks pay; the O.
Last week, the Obama Administration proposed several regulatory reforms, including the elimination of the O. About six weeks later, Kurland sent Mozilo an emotional memo. Kurland said that he could not accept this arrangement, and that when Mozilo stepped down as C. Both were told on numerous occasions to be adults. Nick Krsnich, meanwhile, had decided to leave the company. In March, , he went to say goodbye to Mozilo. Krsnich believed that Kurland had failed in his responsibilities as president, by not reining in Sambol.
Nevertheless, Krsnich told Mozilo that if the choice were between Kurland and Sambol he would unhesitatingly choose Kurland.
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In early September, , the company announced that Sambol would replace Kurland as president and chief operating officer, that Mozilo would stay on as chairman and C. Kurland left the company, where he had worked for twenty-seven years, without even sending an e-mail message to employees. Last year, along with several other former Countrywide executives, he started a new company, PennyMac, which buys and sells distressed mortgages; many people were outraged that someone who had helped create the mortgage debacle was now scavenging its remains.