Blaming Countrywide's Angelo Mozilo

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Fans of scapegoating can applaud the SEC's assault on Angelo Mozilo, the former CEO of Countrywide Funding.  My guess is that Mozilo, like many mortgage industry executives, was conflicted during the late stages of the housing bubble.  On the one hand, they knew that lowering lending standards was imprudent.  On the other hand, the loans were performing too well to justify reversing course. 


I can make a plausible case that Mozilo would be raising red flags internally while reporting positive results externally, and yet he was honest in both contexts.  It was true that what lenders were doing was imprudent by traditional standards, and it was also true that--until 2007--it was working out pretty well for them. 

In hindsight, we know that Mozilo and others would have done better to take a firm stand against high-risk lending.  But if we are going to use hindsight to put people on trial for their errors of judgment, then just about every policymaker and every financial executive deserves to be indicted.

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Arnold Kling

Arnold Kling earned his Ph.D in economics at MIT. He was an economist on the staff of the Federal Reserve Board. From 1986-1994 he worked at Freddie Mac. He started Homefair.com in 1994 and sold it in 1999. His fourth book, From Poverty to Prosperity, co-authored with Nick Schulz, is due out in April of 2009. He blogs regularly at Econlog.
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