Editore"s Note
Tilting at Windmills

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January 11, 2008
By: Kevin Drum

PAY FOR PERFORMANCE....Think there are only losers from the subprime lending debacle? Don't be a chump:

Countrywide Financial Corp. founder Angelo Mozilo, one of the nation's highest-paid chief executives, stands to reap $115 million in severance-related pay if his troubled company is acquired by Bank of America Corp., regulatory filings show.

Free rides on the company jet are also included in Mozilo's departure deal, and the company will pick up his country club bills until 2011.

Ain't life grand?

Kevin Drum 12:09 PM Permalink | Trackbacks | Comments (35)

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Comments

Duane Ackerman, former CEO of Bell South and Ed Whitaker, former CEO of ATT have both retired with diamond studded, pure platinum parachutes.

They may need that money to lawyer up for their roles in the warrentless wiretapping adventures.

Posted by: MEG on January 11, 2008 at 12:16 PM | PERMALINK

Stop exaggerating! Life is going to get really rough for this guy after 2011.

Leave our executives alone! We're lucky they give us anything!

Posted by: jerry on January 11, 2008 at 12:32 PM | PERMALINK

Perhaps the fucker could have a fatal accident.

Cheers,

Alan Tomlinson

Posted by: Alan Tomlinson on January 11, 2008 at 12:37 PM | PERMALINK

Bear in mind that this severance is ON TOP OF some $414 million in stock proceeds from 2004-2007 (at least according to the WSJ). Half a billion dollars so that one man could run the U.S. economy into the ground.

The real term for the guy should be "robber baron."

Posted by: Diana on January 11, 2008 at 12:39 PM | PERMALINK

I think we should start outsourcing CEO positions to Japan. They only charge 7 times the average worker salary and their performance is just as good as any American CEO's. They could communicate with their American employees via a 1-800-number. Just think of all reduced shipping costs if we kept production in America and hired cheaper but well qualified foreign CEOs.

Posted by: corpus juris on January 11, 2008 at 12:40 PM | PERMALINK

The Market works!!!!

Posted by: Gore/Edwards 08 on January 11, 2008 at 12:42 PM | PERMALINK

Glinda: Are you a good witch, or a bad witch?
Dorothy: Who, me? Why, I'm not a witch at all. I'm Dorothy Gale from Kansas.
Glinda: Oh, well, is that a witch [gesturing toward Toto]?
Dorothy: Toto? Toto's my dog.
Glinda: Well, I'm a little muddled. The Munchkins called me because a new witch has just dropped a house on the Wicked Witch of the East. And there's the house, and here you are, and that's all that's left of the Wicked Witch of the East. And so, what the Munchkins want to know is, are you a Good Witch or a Bad Witch?
Dorothy: Oh, but I've already told you, I'm not a witch at all! Witches are old and ugly. [The Munchkins giggle from concealment] What was that?
Glinda: The Munchkins. They're laughing because I am a witch. I'm Glinda, the Witch of the North.
Dorothy: You are?! Oh, I beg your pardon! But I've never heard of a beautiful witch before.
Glinda: Only bad witches are ugly. The Munchkins are happy because you have freed them from the Wicked Witch of the East.
Dorothy: Oh, but if you please, what are Munchkins?
Glinda: The little people who live in this land. It's Munchkinland. And you are their national heroine, my dear.

Posted by: Where's Dorothy? on January 11, 2008 at 12:42 PM | PERMALINK

Wow....that didn't take long.

I was thinking over coffee this morning while reading about the potential Countrywide buyout...."I wonder how much the top execs who engineered this fiasco will get as a reward for their competence?"....and now I know.

Just another astounding example of free market forces at work.

Posted by: dweb on January 11, 2008 at 12:43 PM | PERMALINK

It is harder than ever to tell the difference between big business and organized crime.

Posted by: Craig Busse on January 11, 2008 at 12:44 PM | PERMALINK

I think, to replace the "golden parachute," we need the golden ass kicking.

Every Countrywide subprime mortgage holder in the country gets one free swift kick at Mozillo's ass.

Posted by: SocraticGadfly on January 11, 2008 at 12:45 PM | PERMALINK

I've been saying for some time that CEO's could use another tax cut...

Posted by: BrianInAtlanta on January 11, 2008 at 12:45 PM | PERMALINK

CJ, better yet, outsource them to India.

Posted by: SocraticGadfly on January 11, 2008 at 12:48 PM | PERMALINK

Craig Busse: It is harder than ever to tell the difference between big business and organized crime.

Big business is better organized.

Posted by: thersites on January 11, 2008 at 12:58 PM | PERMALINK

CJ and SG: What a great idea. These morons have been outsourcing jobs based on the same premise. The greedy shareholders and crazy analysts should see how much money they can save their corporations if they outsource some of the exec positions to Japan/India. Hell, even China/Mexico.

Posted by: GOD on January 11, 2008 at 12:59 PM | PERMALINK

Countrywide bought up our mortgage on our previous house. In general we found them rude, inconsiderate and just plain nasty to deal with. When they jerked us around once too often on a refinance we told them to go to hell, arranged alternative financing, and walked away sticking them with the refinance fees. Unfortunately on our next house we ended up with Washington Mutual, who while nicer to deal with, was even more incompetent. They refused to refinance us into a fixed rate, offering only another ARM. Fortunately we were able to refinance with another company while interest rates were low. It’s just amazing that companies with such greedy and incompetent management somehow came to dominate the industry.

Posted by: fafner1 on January 11, 2008 at 1:00 PM | PERMALINK

[sobbing.mp3]
[primalscream.mp3]

Posted by: Cap'n Phealy on January 11, 2008 at 1:02 PM | PERMALINK

Why is it that normal employees get a months notice if they are lucky, but these guys get 3 times their annual salary plus continuing use of the company jet? This guy made 1% of the entire value of the company in compensation last year ($41M). I appreciate that he founded the company, but he'd already sold $650M in stock over the previous 10 years. Not to mention his irregular change in dealing rules allowing him to sell $150M just ahead of the mortgage crunch ...

Posted by: royalblue_tom on January 11, 2008 at 1:15 PM | PERMALINK

It’s just amazing that companies with such greedy and incompetent management somehow came to dominate the industry.

Amazing?

When did you start paying attention?

Any society where "greed is good" can become a catchphrase and "In Praise of Nepotism" a best-seller is bound to produce exactly those results.

Serfin' USA!

Posted by: lobbygow on January 11, 2008 at 1:17 PM | PERMALINK

Ah, yes, run your company into the ground and walk away with a multimillion dollar severance package while your former employees stand in line for unemployment.

It's The American Way(TM)!

Posted by: Mnemosyne on January 11, 2008 at 1:24 PM | PERMALINK

Ain't life grand? How 'bout 115,000 grand!

Posted by: Robert Earle on January 11, 2008 at 1:26 PM | PERMALINK

I think the poor guy needs a big tax cut, don't you? And Rudy! will give him one on the first day of his administration!

Posted by: Steve LaBonne on January 11, 2008 at 1:26 PM | PERMALINK

Why don't we just tie the minimum wage in an industry to a fixed percentage of CEO pay, benefits, and perquisites. We could start with the ratio between employee wages and CEO pay circa 1955 or so.

[Awaiting yelps of free marketeers, who support the God-given right of thieves like Mozilo to get their cronies to give them large chunks of the company they are running into the ground before its ultimate demise.]

Posted by: David in NY on January 11, 2008 at 1:32 PM | PERMALINK

We should all be lucky enough to fail so miserably. Bush is the poster child for being promoted for every failure. The Peter principle in reverse.

Posted by: AJ on January 11, 2008 at 1:46 PM | PERMALINK

Meanwhile, Marion Jones goes to jail.

Posted by: Shine on January 11, 2008 at 1:49 PM | PERMALINK

This is the best argument EVER for a steeply progressive income tax (at least for the top 1% anyhow). If they made those tax changes, either the government would get much needed revenue or they wouldn't be offering them so much in the first place. Deterring these kinds of pay and severance packages would actually *improve* the performance of these CEO's. If they weren't looking at so much when they bailed out, they might be focusing on trying to run the company better and KEEPING their jobs.

Posted by: Doc at the Radar Station on January 11, 2008 at 1:49 PM | PERMALINK

David, more seriously, we need a COLA as part of the min wage. Biggest Dem mistake on the min wage hike was that.

Posted by: SocraticGadfly on January 11, 2008 at 1:51 PM | PERMALINK

You all think Bank of America had just $4.1 billion lying in safe somewehere and just decided yesterday "Hey, let' go and buy Countrywide Mortgage. It has lots of debt and lots of delinquent mortgages and foreclosures paying nothing in. It's great inventment."

Nope. The Fed is using BOA to prevent Countrywide's bankruptcy as Herb Greenberg points out in his Marketwatch.com blog:

"We’ll know it soon enough, but with the leak that Bank of America is near acquiring Countrywide, several things would appear apparent (at least while we’re playing the guessing game):

1. The Fed is behind the deal.
2. The Fed is behind the deal because the rumors yesterday of a near bankruptcy were probably true.
3. As part of the deal, the government likely agrees to guarantee BofA against Countrywide-related losses.
4. Lost in the in the noise yesterday was that Moody’s downgraded the ratings on 30 (count ‘em — THIRTY!) tranches of Countrywide’s mortgage debt by more than a few notches. They did something similar before American Home Mortgage filed for bankruptcy.
5. Investors bid the stock higher assuming a premium when it’s likely that BofA still needs to fully assess the value of the assets before the deal’s full value will be known.
6. Big question, of course, is what Countrywide investors will get.
7. Rule of thumb with bankruptcies: Stocks often double on their way to zero.
8. BofA gets a free bank and a put to the government.

Meanwhile, Jon Najarian of Optionsmonster.com writes, “To say there was HUGE unusual activity in Countrywide Financial ahead of today’s news that Bank America was close to finalizing a deal to buy the troubled mortgage giant would be as surprising as seeing Dennis Kucinich end his presidential run! We show over 304,000 calls traded against 248,000 puts, but the interesting thing here is that the bulk, some 76 percent of these calls were bought before the announcement! To us this means the likelihood of someone being tipped off was quite high. Like Burj Dubai Tower high!”

Onward."

A bailout by any other name is still a bailout.

Still think we need a Federal Reserve? To do stuff like this?

Posted by: Sean Scallon on January 11, 2008 at 2:16 PM | PERMALINK

This will make BOA the largest mortgage lender in the country. So, my bank has volunteered to become captain of the Titanic. I think it's time to find another bank.

Posted by: Speed on January 11, 2008 at 2:16 PM | PERMALINK

Doc,

But don't you know? The poor need lower pay as an incentive to work harder. The rich need more pay as an incentive to work harder.

It is a tough club to break into, but once you are in, by golly, you are IN.

Posted by: Tripp on January 11, 2008 at 2:58 PM | PERMALINK

Craig Busse >"It is harder than ever to tell the difference between big business and organized crime."

There is no difference other than the "business men" usually wear better shoes.

"No place is so strongly fortified that money could not capture it." - Marcus Tullius Cicero

Posted by: daCascadian on January 11, 2008 at 3:30 PM | PERMALINK

Sean, I doubt the Fed gave BofA an "order" to buy Countrywide. OTOH, BofA has already been scored by several analysts for throwing good money after bad in an effort to protect a $2B previous investment in Countrywide.

Posted by: SocraticGadfly on January 11, 2008 at 3:45 PM | PERMALINK

Free rides on the company jet are also included in Mozilo's departure deal, and the company will pick up his country club bills until 2011.

Every Republican vote, every conservative website, lobbying group, blog post, think tank, etc., all exist for one reason: to sustain this guy's lifestyle. They might think otherwise, but they're wrong.

Posted by: Del Capslock on January 11, 2008 at 4:29 PM | PERMALINK

Any of the Democratic candidates should ask any of the Republican candidates: "Please defend this so that the average American voter can understand it." And stand back and watch the stammering.

Posted by: Piehole on January 11, 2008 at 4:44 PM | PERMALINK

Maybe not an order, but certainly a strong, hint, wink nudge you name it. And increasing liquidity it would make it easier for them to purchase the company. Many analysists have said Countrywide is one of those "too big to let fail" companies, so instead of direct bailout, which would not fly in Congress, they help in any way they can BOA purchase Countrywide.

But the bottom line of all of this is quite clear: Once again the Fed is a backstop for failed compaines or hedge funds or financial instutitions which the people who run them into the ground to get off scott free instead of suffering the consequences. And so long as they keep doing this, the will continue to do so, because thjere are lots of bad CEOs and other willing spend like druken sailors knowing the Fed will save them in the end.

Posted by: Sean Scallon on January 11, 2008 at 4:49 PM | PERMALINK

And why is it that people think John Edwards's message is too extreme?

Posted by: TFisher on January 11, 2008 at 8:48 PM | PERMALINK




 

 

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