Former Bank of America chief executive Ken Lewis played hardball when the Treasury secretary called. Former Countrywide CEO Angelo Mozilo lamented the "gold rush" mentality that influenced people to buy bigger and bigger homes, and admitted he got caught up in the mania. And former Lehman Brothers CEO Dick Fuld couldn't get Lewis to answer the phone when Lehman teetered near collapse.
Those details and others emerged from a report filed Thursday by the Financial Crisis Inquiry Commission, a government-appointed panel meant to root out the causes of the financial crisis. Lewis, Mozilo, and former Merrill CEO John Thain all testified separately to the FCIC in private meetings, and Thursday's report is the first release of any details of those interviews. Some other banking heavyweights, including current Bank of America CEO Brian Moynihan, testified at hearings that were open to the public and have already been scrutinized.
Bank of America plays a prominent role in the FCIC's 600-plus page report: The Charlotte-based bank emerged from the crisis as the nation's biggest bank. It gained market share but also regulatory troubles and quarterly losses during the crisis, when it purchased exotic-mortgage lender Countrywide and embattled investment bank Merrill Lynch. Following are some excerpts from the bankers' testimony to the FCIC:
Mozilo testified to the FCIC in September 2010. He said he knew in summer 2007 that his company was facing liquidity problems, as foreclosures mounted and loan production fell. At the time, Mozilo recommended that Countrywide draw down $11.5 billion in backup lines of credit, even though he knew it could hurt Countrywide's credit ratings.
"We had a pipeline of loans and we either had to say to the borrowers, the customers, 'We're out of business, we're not going to fund' - and there's great risk to that, litigation risk," Mozilo told the FCIC. "....When it's between your ass and your image, you hold on to your ass."
Mozilo also told the FCIC that he believed the country got caught up in a "gold rush" mentality as housing prices skyrocketed in the early 2000s, and he said he'd been swept up as well. "Average people got caught up in the mania of buying a house, and flipping it, making money. ... They buy a house, make $50,000 ... and talk at a cocktail party about it."
Bank of America bought Countrywide in 2008, a purchase that made Bank of America a major mortgage player, but has also brought legal settlements and ongoing foreclosure investigations. Mozilo left Countrywide after it was bought. In October, he agreed to pay more than $65 million to settle regulators' charges that he'd misled shareholders about Countrywide's losses.
But Mozilo also defended his company in his testimony to the FCIC. "Countrywide was one of the greatest companies in the history of this country," he told the panel, "and probably made more difference to society, to the integrity of our society, than any company in the history of America."
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