ecopal
02-05-2008, 02:28 PM
Warning: Don’t read this on a full stomach ....
February 3, 2008
Fair Game
Lenders Who Sold and Left
By GRETCHEN MORGENSON
http://www.nytimes.com/2008/02/03/business/
excerpts:
THE Federal Bureau of Investigation said last week that it had opened criminal investigations into 14 companies that played a part in the mortgage boom and bust. ... they included mortgage brokers, lenders, and the Wall Street banks that packaged and sold the securities. Investigators are looking for accounting fraud and possible insider trading at the companies, an F.B.I. spokesman said.
... 225 United States lenders have gone bye-bye since late 2006. Nabbing even a fraction of the mortgage captains — those who jumped ship and those who didn’t — could take eons. And many of them may be guilty of only greed, not a crime....
Consider John A. Johnston, former president of the Western division of the American Home Mortgage Investment Corporation. American Home Mortgage, which was the nation’s 10th-largest mortgage lender, made $60 billion in loans in 2006. When it filed for bankruptcy last August, more than 6,000 employees lost their jobs.
Mr. Johnston, however, was lucky enough to land at IndyMac, a mortgage lender and savings and loan in Pasadena, Calif. Helping to ease his transition was $7.33 million he collected from sales of American Home stock made in the fall of 2006. The average of $35 a share that Mr. Johnston received when he sold was very near the all-time closing high of $39.84 that American Home’s shares hit in 2005.
Then there is Edward F. Gotschall, a founder and vice-chairman of finance at New Century Financial, which collapsed last April. It was one of the first lenders to fail in the subprime bust....
Mr. Gotschall was paid well at New Century. Between 2003 and year-end 2005, he earned more than $1.5 million in salary and almost $7 million in bonuses. He also walked away with $24 million generated in stock sales during the latter half of 2006.
FINALLY, let’s not forget our friends at Novastar Financial, another anything-goes lender whose stock now trades at $1.12. Its home mortgage subsidiary filed for bankruptcy on Jan. 24 and it has let go all but 30 of its employees. (Novastar had 1,700 employees in 2005.)
Among those shown the door was Scott F. Hartman, Novastar’s co-founder and chief executive. Between 2003 and year-end 2006, Mr. Hartman earned $5.5 million in salary and bonuses at Novastar. Just before he was terminated on Jan. 3, he received a little sweetener. ....
Such is the way of our world today. When boom goes bust, the handful of winners moves on, bankrolls largely intact.
The legions of losers, meanwhile, try to figure out what hit them.
As the American taxpayer will probably foot much of the bill for this crisis, those legions include you.
February 3, 2008
Fair Game
Lenders Who Sold and Left
By GRETCHEN MORGENSON
http://www.nytimes.com/2008/02/03/business/
excerpts:
THE Federal Bureau of Investigation said last week that it had opened criminal investigations into 14 companies that played a part in the mortgage boom and bust. ... they included mortgage brokers, lenders, and the Wall Street banks that packaged and sold the securities. Investigators are looking for accounting fraud and possible insider trading at the companies, an F.B.I. spokesman said.
... 225 United States lenders have gone bye-bye since late 2006. Nabbing even a fraction of the mortgage captains — those who jumped ship and those who didn’t — could take eons. And many of them may be guilty of only greed, not a crime....
Consider John A. Johnston, former president of the Western division of the American Home Mortgage Investment Corporation. American Home Mortgage, which was the nation’s 10th-largest mortgage lender, made $60 billion in loans in 2006. When it filed for bankruptcy last August, more than 6,000 employees lost their jobs.
Mr. Johnston, however, was lucky enough to land at IndyMac, a mortgage lender and savings and loan in Pasadena, Calif. Helping to ease his transition was $7.33 million he collected from sales of American Home stock made in the fall of 2006. The average of $35 a share that Mr. Johnston received when he sold was very near the all-time closing high of $39.84 that American Home’s shares hit in 2005.
Then there is Edward F. Gotschall, a founder and vice-chairman of finance at New Century Financial, which collapsed last April. It was one of the first lenders to fail in the subprime bust....
Mr. Gotschall was paid well at New Century. Between 2003 and year-end 2005, he earned more than $1.5 million in salary and almost $7 million in bonuses. He also walked away with $24 million generated in stock sales during the latter half of 2006.
FINALLY, let’s not forget our friends at Novastar Financial, another anything-goes lender whose stock now trades at $1.12. Its home mortgage subsidiary filed for bankruptcy on Jan. 24 and it has let go all but 30 of its employees. (Novastar had 1,700 employees in 2005.)
Among those shown the door was Scott F. Hartman, Novastar’s co-founder and chief executive. Between 2003 and year-end 2006, Mr. Hartman earned $5.5 million in salary and bonuses at Novastar. Just before he was terminated on Jan. 3, he received a little sweetener. ....
Such is the way of our world today. When boom goes bust, the handful of winners moves on, bankrolls largely intact.
The legions of losers, meanwhile, try to figure out what hit them.
As the American taxpayer will probably foot much of the bill for this crisis, those legions include you.