SEC Watchdogs Slept Through the Biggest Heist in History
The blogs are chattering about poor Lee Mozilo. He's no Angelo, they say. The SEC claims he told investors that all was well in his company, Countrywide, while he was dumping shares.
We don't know the details, so we wouldn't rush to judgment. But our guess is that the SEC is trying to recover its reputation by putting on a few show trials. The SEC has a pack of watchdogs on the payroll. But somehow thieves stole every decent part in the junkyard without a single one of these mutts bothering to bark. Now, they're indignant...and out for justice!
Did Mozilo do something wrong? We don't know. But the question would never have come up if it hadn't been for the crisis in housing debt. As long as housing was going up, everyone was happy with Countrywide's business model. Yet didn't everyone know that the mortgage finance business was a dangerous place to be at the end of a housing bubble? Didn't the SEC know it, too? If we recall correctly, Mozilo said so himself...
But the SEC watchdogs slept through the biggest heist in history. And now the people who lost face and lost fortunes are eager to pin the blame on someone other than themselves.
But that's just part of the whole process of deleveraging. That's how capitalism works. People lose money...then they lose jobs...and houses...and businesses go into chapter 11 and a few of their CEOs go to jail.
All that takes time.
Bill Bonner
for The Daily Reckoning Australia
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About the Author
Best-selling investment author Bill Bonner is the founder and president of Agora Publishing, one of the world's most successful consumer newsletter companies. Owner of both Fleet Street Publications and MoneyWeek magazine in the UK, he is also author of the free daily e-mail The Daily Reckoning.
Comment by GaryB on 11 June 2009:
Will the SEC have the balls to go after the rating agencies? In the sub-prime mess, the part played by the rating agencies appears to have been deliberate fraud. The bankers and mortgage brokers originated sub-prime loans, the investment banks packaged up the sub-prime mortgage-based equities, but it was the rating agencies that stamped the crap as "investment grade", presumably knowing full well that it was crap. If it wasn't deception, then at the least gross incompetence.