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Mozilo says "Countrywide much better than...Berkshire Hathaway"


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Here is some amusing (but instructive psychological) "comedy" for your weekend reading:


Brought to you by no other than Countrywide's Mozilo.



As reported in the NY Times,  Mozilo, founder of Countrywide and also payer of the largest assessed SEC sanction by a public company executive, said that he compared Countrywide to BH.  He told the examiners of the Federal Inquiry Commission that Countrywide’s stock grew “25,000 percent over 25 years — a much better performance than Warren Buffett at Berkshire Hathaway. This is documented.”


This is so ludicrous that is beyond belief. Needless to say, when it sold it wasn't beating BH.  But what is instructive is what psychological factors are at work here?


At a minimum, I have a lolapalooza of psychological tendencies:

  • Dissonance: he thought he built a great company, but it went poof.
  • Commitment: he has been the public face of the company most of his adult life.
  • Defensive reaction to perceived threat
  • All of which cause an inattentional blindness, i.e. when the company sold its return was alot less.




The quote from the NY Times follows below:



he compared Countrywide to Berkshire Hathaway, the conglomerate run by Warren E. Buffett. He told the examiners that Countrywide’s stock grew “25,000 percent over 25 years — a much better performance than Warren Buffett at Berkshire Hathaway. This is documented.”


He is right, to a point. From 1982 to August 2007, Countrywide’s stock price gained nearly 25,000 percent, according to the research firm Thomson Reuters. Berkshire’s investors experienced similarly strong gains over the same period.


But Mr. Mozilo failed to acknowledge what came next for shareholders. Countrywide plummeted more than 90 percent, to around $4, in February 2008. At the nudging of government officials, Bank of America bought the lender for $4 billion, or roughly $4.25 a share, in July 2008.


Mr. Mozilo lauded the deal, telling the commission that the sale “did not cost the taxpayers a dime” and saved more than 50,000 jobs.

(NY Times 2/17/11 Dealbook by Protess)



Note that Bank of America is still paying for the deal!

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Guest ValueCarl

I'll never forget California's newly elected Governor, Jerry Brown's sister, exiting from Angelo's board "stage left" right before the heat of the implosion.




In America, we are continuing to learn that, "There's no business, like white collar crime business." The Tan Man and Dapper Don look alike, seems to be a Teflon Don too. Good news for Bank of America, I'm sure.  :-(



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Guest ValueCarl

I always liked connecting dots as a kid!  ;D


Bank of Italy





Bank of America's history dates to 1904, when Amadeo Giannini founded the Bank of Italy in San Francisco to cater to immigrants who were denied service from other banks.[23][24] Amadeo was raised by the Fava/Stanghellini family when his father was shot while trying to collect on a $10.00 debt.[citation needed] When the 1906 San Francisco earthquake struck, Giannini was able to get all deposits out of the bank building and away from the fires. Because San Francisco's banks were in smoldering ruins and unable to open their vaults, Giannini was able to use the rescued funds to start lending within a few days of the disaster. From a makeshift desk of a few planks over two barrels, he loaned money to anyone who was willing to rebuild. Later in life, he took great pride that all of these loans were repaid.

In 1922, Giannini established Bank of America and Italy[25] in Italy by buying Banca dell'Italia Meridionale,[26] itself only established in 1918.[27][28]

On March 7, 1927, Giannini consolidated his Bank of Italy (101 branches) with the newly formed Liberty Bank of America (175 branches). The result was the Bank of Italy National Trust & Savings Association with capital of $30,000,000, and resources of $115,000,000.

In 1928, A. P. Giannini merged with Bank of America, Los Angeles and consolidated it with his other bank holdings to create what would become the largest banking institution in the country. He renamed his Bank of Italy November 3, 1930, calling it Bank of America. The merger was completed in early 1929 and took the name Bank of America. The combined company was headed by Giannini with Orra E. Monnette serving as co-Chair.



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