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Foul Ball?
January 30, 2008
Maybe it's just me, but I thought there was some karmic convergence when in the same week Countrywide collapsed into the arms of Bank of America and former Sen. George Mitchell testified in Congress on the doping scandal in major league baseball.
Both events grew out of the same unnerving ability to rationalize anything to get to the top of the game or stay there. In baseball, world class athletes succumbed to whatever would get them the next homerun or a higher RBI number on their Topps baseball card. In mortgage lending, former Countrywide CEO Angelo Mozilo pleaded that he and his firm had no choice but to dive headfirst into the toxic lagoon of subprime to keep up with the competition and secure their long cherished goal of being the number one mortgage lender in America.
Greed, hubris and ambition are the common drivers. What a disheartening spectacle.
But in baseball, at least, you can argue that it's always been the same. Doping is a time honored tradition. After all, it was baseball legend Leo Durocher who is credited with dryly noting that "nice guys finish last." (What he actually said was "The nice guys are all over there. In seventh place.") In the mortgage business, everyone should have known better. What kind of world are we living in where the federal banking regulators feel compelled to issue regulations that require banks to follow this simple rule: do not make a loan to someone that you know they cannot repay? Isn't this the basic, bedrock principle of banking?
Apparently not. In spite of many people warning investors, bankers and even rating agencies that the market was badly mispricing risk, brokers, bankers and investors ignored the signs and piled on. Banking regulators finally adopted that rule and some others to rein in these drunken sailors. But too late for millions of American borrowers and the communities in which they live.
The ball players caught up in the scandals are all exceptional athletes and competitors. They reached the highest levels of their sport on talent and drive. But reaching even higher was too great a temptation. So, too, with Angelo Mozilo. His career in building the Countrywide powerhouse, in helping millions to buy homes and access mortgage credit, and in supporting public efforts to increase access established his reputation. What a shame that what most people will remember now is the ruins left for homeowners, shareholders, employees and communities from the mortgage industry's own "doping" scandal.
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