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Published:March 10th, 2008 11:09 EST
Countrywide Financial being eyed by FBI

Countrywide Financial being eyed by FBI

By SOP newswire

By Mark Huffman

It was inevitable that the cascading damage from the subprime loan mess would eventually result in a discussion of criminal charges. That time appears to have arrived.

In stories published over the weekend, a number of media outlets reported that Countrywide Financial, the nation's largest mortgage lender, is the subject of an FBI probe. Unnamed sources within the bureau are quoted as saying Countrywide is being investigated for possible securities fraud.

The FBI has been known to be checking into a number of financial companies in connection with subprime lending, but this is the first time the name of an actual company has been publicly floated.

The investigation was first reported by the Wall Street Journal, but soon the New York Times, Reuters, and other news outlets were getting information from one or more sources within the government.

The sources said the FBI is trying to determine whether Countrywide misrepresented the soundness of its loans, which were packaged into securities and sold on Wall Street.

The subprime implosion, which continues to drive a growing number of homeowners into foreclosure, has now begun to strike terror into the hearts of stock traders, particularly in the financial sector. Banks know that many of the mortgage securities they hold contain bad loans, but they have no way to know how many are bad, and how many will default in the future.

As a result, banks have become very reluctant to make loans, even to people and companies with good credit, starving the economy of the capital it needs to grow. The result, many economists warn, is an almost certain recession.

CEOs in the hotseat

Meanwhile, Countrywide's CEO, along with the CEOs at Merrill Lynch and Citigroup, faced a withering barrage of Congressional criticism Friday, as they appeared before the House Oversight and Government Operations Committee.

Lawmakers took special aim at the compensation each executive received - $120 million for Countrywide's Angelo Mozilo; a $161 million retirement package for ex-Merrill Lynch CEO Stanley O'Neal; and $39.5 million in stock, options, bonus and perks for former Citigroup CEO Charles Prince.

Committee chairman Rep. Henry Waxman (D-CA) observed that the mortgage crises appeared to be hurting everyone, except for the CEOs who, he said, had the most responsibility for the mess.