“I loved what we did. We changed the lives of millions and millions of people in a positive way.” Those were the words of the late, great Angelo Mozilo. Yes, you read that right. Put great next to Mozilo’s name. He was more than worthy of the adjective.
There’s a market signal in big fortunes, and Mozilo had one. His was a sign that he discovered a market that was rather invisible to the players in the mortgage space who came before him. The simple truth is that if the financing of home purchases had already been a vibrant market, Mozilo’s passing wouldn’t have rated mention. That is so because known markets are quickly populated by established businesses.
In creating Countrywide Mozilo lived what he became. As a Wall Street Journal obituary relayed, “at first he couldn’t afford to buy a home for his family,” only for Mozilo to settle for a rental in Glendale, CA. From his own experiences Mozilo sensed a wildly underserved market that begged creation. As the same obituary reported, “Mozilo took pride in finding ways to make mortgages to deserving borrowers who might not get loans elsewhere, including minority and working class families.”
Translated for those who need it, Mozilo saw in people what the great Michael Milken saw in businesses. While traditional business finance was all about matching established commercial giants with funds, Milken recognized that the present was a lousy predictor of the future. He would finance the prosperous business of tomorrow that established financiers were ignoring in the present.
Mozilo would do the same for those eager to own a home. While they plainly couldn’t afford to purchase a home outright in the present, the future was another story altogether. People evolve, they get better at their jobs, they’re promoted. Mortgages were just a proxy for trust in the potential of people working their way up in the world’s most economically dynamic country.
What’s important is that Mozilo’s great fortune once again vindicated his vision. Had he been wrong about expanding the reach of mortgages to those traditionally not served, his career almost certainly goes unnoticed. Mozilo's wealth confirmed discovery of a very worthy pool of borrowers who had previously been ignored. And while there’s a strong argument against home ownership (Jack Ryan and I make it in our upcoming book, Bringing Adam Smith Into the American Home), what can’t be denied is that for many Americans, ownership is the dream. Mozilo played an outsize role in fulfilling that dream.
Skeptics will say Countrywide made sloppy loans amid the housing craze of the 2000s, Mozilo was the “face” of the subsequent crisis, etc. Actually, no less than Blackstone co-founder Stephen Schwarzman has pointed out that the first draft of history was wrong, that north of 90% of mortgages issued from 2006-2008 performed. Is it possible Mozilo and others stretched? Well, of course. That was the business they were in: executing the proverbial backflip to get people into homes.
Furthermore, an errant loan or errant loans could never cause a crisis as is. Such a view presumes that market signals freely arrived at are the stuff of crisis. No, markets just are. They report. Crisis is what happens when politicians substitute their limited knowledge for those of the knowledge-pregnant marketplace. Which is what happened in 2008. The markets healthily signaled rising skepticism about the quality of mortgages issued, only for politicians to step on this healthy signal.
In short, the U.S. political class was the crisis in 2008 for intervening in what was healthy. Absent the intervention, Angelo Mozilo properly retires a hero, and dies one.
No comments:
Post a Comment