Angelo Mozilo, chief executive of Countrywide Financial, on Monday strongly criticised the US government’s response to the collapse of the subprime lending market, saying there had been “zero” effort to tackle the crisis.
“In terms of tangible effort from the federal government…there has been no programme, no federal effort, no legislative assistance – zero,” he said.
He criticised the US government’s refusal to lift caps on the size of loans that can be bought by Fannie Mae and Freddie Mac, the government-sponsored entities created to promote affordable housing.
Fannie Mae and Freddie Mac are prohibited from buying loans worth more than $417,000. Failure to increase this limit would continue to depress the property market and keep first-time buyers out of the housing market, particularly in California, where property is expensive, said Mr Mozilo.
“First-time buyers cannot buy a home now. Only the wealthy and privileged can afford to buy homes,” he said.
Mr Mozilo’s stock sales are being probed by the Securities and Exchange Commission as part of an examination of trading by executives at subprime lenders. He has sold more than $130m worth of Countrywide shares since beginning a stock-sale plan at the end of last year.
Quan Zhu, a former Countrywide vice-president, agreed to pay $108,840 to settle insider trading charges filed against him by the SEC, without admitting or denying the allegation, the commission said yesterday in a statement.
The SEC alleged that Mr Zhu traded in Countrywide stock “while aware of confidential negative earnings information”.
Speaking at the Milken Institute’s State of the State conference in Beverly Hills, Mr Mozilo blamed the subprime crisis on “easy, low-cost money” that drove up house prices and “exotic loans and diminished underwriting standards”.
“People stretched themselves,” he said, though he implied that the blame for the crisis should be shared.
“It takes a village to do this. As long as [house] values keep falling, the subprime situation will get worse.”
Jeff Mezger, chief executive of KB Home, said house prices would remain depressed. “We’re anticipating that it’s going to stay tough for quite some time.”
Countrywide, the largest US mortgage lender, last week announced a $1.2bn third-quarter loss, reflecting $2.9bn of mortgage-related writedowns, credit losses and restructuring charges.
But shares in the California-based lender rose sharply after it said it would return to profitability this quarter.
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