Maria Bartiromo's interview of Angelo Mozilo ("The heat on Countrywide," News & Insights, Sept. 10) was tough and insightful. Clearly, Mozilo worked hard for years to build Countrywide Financial (CFC). It is sad to see many of his customers suffering under pending or potential future home loss through foreclosure. It also is an unfortunate coincidence that Mozilo has received $100 million by exercising options while many shareholders and customers suffer.
This presents Mozilo with a unique opportunity: He could use some of his new riches to set up a fund to help families of customers facing home loss. Think of the suffering he could alleviate for just one child who gets to stay in his or her home. Multiply that by the tens or hundreds of families he could help by setting aside 10% or 20% of his windfall. Hopefully he will seize this opportunity.
It was difficult to read Angelo Mozilo's interview because of the blinding light of his halo. In his "mission to lower the barriers of entry for...homeownership" he developed "184 programs" designed, in essence, to circumvent the historically proven risk-evaluation standards and reap huge, though temporary, profits for the corporation. The permanent benefit has been the obscene salaries and bonuses for him. The only reason Countrywide is "modifying" loans is to keep a lid on the disasters, not out of altruism. His claims are beyond absurd. Does his company not advertise as well as promote itself within the industry? Mozilo points out that "it's important to understand that everybody has experienced substantial losses." Not quite, Mr. Mozilo.
The problems in the subprime lending market are due to low underwriting standards and then overvaluation of these portfolios. A key question that needs to be asked is how these mortgage originators are compensated. Many times the originator is compensated based on production of loans, which includes the good, bad, and the ugly. Once a loan is on the books, the originator receives his or her commission and goes to find new loans to earn new commissions. The documentation that is created can be subjective, so that loan approval is achieved.
I don't know of a local lending institution that has 184 different programs [as Countrywide says it had]. Each client would need to hire a financial adviser to understand which program is right for them.
Angelo Mozilo says: "Remember, we didn't reach out to home buyers. They came to us." Countrywide is still running commercials saying: "No points! No documentation fee! No title or escrow fees! Absolutely no closing costs, so you end up with more cash." Either Mozilo defines "reaching out" as "grabbing the arms of people walking by our offices" or he thinks readers are stupid enough to believe Countrywide did not push no-cost cash-out loans. Either one is insulting.
What's a poor HR professional to do? "How to make a Microserf smile" (Managing, Sept. 10) seems to join the growing list of HR-bashing articles that appear on a regular basis.
There was a time when criticism of HR was justified: those people who make the rules about attendance and performance. Over the past several years, however, HR leaders have done a pretty good job of being more aligned with business needs.
Therein lies the problem. If one is too aligned with the needs of the business, then needs of employees become subordinated. It's a delicate balancing act to take care of employees and the business and the egos of senior management.
Is it any wonder that people outside traditional HR refuse "developmental" assignments in HR?
Carlton D. Becker
Henry Givray's column about what qualities set the real leaders apart from CEOs ("When CEOs aren't leaders," Ideas, Outside Shot, Sept. 3) made good reading. The wide chasm between a true leader who motivates and a CEO whose sole preoccupation is to quintuple profits by making irrelevant even the most important of ethical norms is brought out well.
Whereas the former has a lot of charisma and probably accepts his share of the risks involved in a project, the latter is a cunning powermonger who thrives on confusion, intrigue, favoritism, and underhanded deals. Analysts agree that it is difficult for the latter to inspire true loyalty from employees.
Robert Reich further confuses the debate over the social responsibility of businesses in "It's not business' business" (Ideas, Outside Shot, Sept. 10).
"Don't believe for a minute that a company is going to sacrifice profits for the sake of social goals," says Reich. Wrong. It's not illegal for companies to give priority to social benefits even at the expense of maximizing profits, and some do. As research increasingly links business success and social responsibility, some businesses are energetically adding social goals.
Reich argues that corporations respond only to the profit motive and therefore aren't "social institutions." He unfortunately ignores the increasingly effective power of citizens now shaping corporate behavior through their choices about purchases, investments, and shareholder actions.
Frances Moore Lapp??
Small Planet Institute
There are three entities that should shoulder most of the blame for the subprime debacle: S&P, Moody's (MCO), and Fitch Ratings ("Let the blame begin," News & Insights, Aug. 6).
If these rating agencies had not slapped AAA and AA ratings on the paper, it never could have been sold to most of the buyers. Imagine yourself as German, French, Australian, or Chinese bankers who find out that they cannot even get a quote on an AAA-rated U.S.-originated debt instrument. It's not just that the AAA paper went down in value. People could not even obtain a quote on it.
These three rating agencies should be fined, placed on probation, or, better yet, barred from the business.
The series of articles on the current credit crisis hits many of the issues underlying the problems we are facing in the mortgage market today. Two of the most serious are the inadequate lending standards and lack of transparency that you mention in "Not so smart" (News & Insights, Sept. 3). There is no doubt that lenders and investors, despite being known for their ability to evaluate risk, made a lot of bad decisions. Fortunately, there were very good mortgage lenders in the business.
These lenders are typically less likely to get caught up in exotic products or predatory lending activities. Unfortunately, extra effort put forth to validate information and the delays experienced in providing loan approvals resulted in many brokers and smaller lenders sending their business to midlevel aggregators, since they were less likely to take the time or spend the money to validate the quality of the loans.
If this crisis is to be resolved today, there must be a way for investors and consumers alike to identify those lenders that have the highest standards of credit and operational quality.
Rebecca B. Walzak, CEO Walzak Risk Analysis
Boca Raton, Fla.