Countrywide Shareholder Lawsuit May Proceed

Gee, what makes you think that the people running the lender were more interested in lining their own pockets than running a business competently?^*

Directors and officers of Countrywide Financial, the beleaguered mortgage lender, must answer shareholder accusations of insider trading and an overall failure to monitor lending practices that led to the company’s collapse, a federal judge in California has ruled.

Rejecting the arguments of Countrywide executives and directors that they were unaware of lax loan operations that led to ballooning defaults, Judge Mariana R. Pfaelzer of Federal District Court in Los Angeles ruled Tuesday that she found confidential witness accounts in the shareholder complaint to be credible and that they suggested “a widespread company culture that encouraged employees to push mortgages through without regard to underwriting standards.”

Plaintiffs also identified “numerous red flags” that would have warned directors of increasingly risky loans made by Countrywide, according to the judge, who rejected a motion to dismiss the suit. “It defies reason, given the entirety of the allegations,” Judge Pfaelzer wrote, “that these committee members could be blind to widespread deviations from the underwriting policies and standards being committed by employees at all levels. At the same time, it does not appear that the committees took corrective action.”

Hope that these folks are left completely destitute. They should spend the rest of their lives in homeless shelters and gutters.

^*The interesting thing about this is how many people are shocked by this. Capitalism 101 is that people act for their own benefit, but somehow the senior executives are exempt from all this?