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BoA private email archive thrown open in $11bn AIG lawsuit

BoA private email archive thrown open in $11bn AIG lawsuit

Devastating messages show internal warnings of forthcoming ‘catastrophe’

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The private internal email archive of Bank of America subsidiary Countrywide has been opened up in court in a $10.5 billion (£6.4 billion) lawsuit filed by insurer AIG.

Executive emails sent before Countrywide’s devastating collapse were detailed in a New York court as AIG sued parent Bank of America over alleged fraudulent sales practices. Countrywide’s failure, as a company that provided a fifth of US home loans, was one of a number of high profile mortgage market problems that preceded the full impact of the financial crisis.

After trawling through hoards of emails sent by Countrywide executives, AIG’s lawsuit details some damaging comments made ahead of the subprime mortgage lender’s collapse, allegedly showing Countrywide executives were aware that the company was providing loans to consumers who could not repay them and misrepresenting the risk level to the companies they were selling the loans onto.

Countrywide chief executive and co-founder Angelo Mozilo wrote in emails to senior colleagues before the firm’s collapse that he was concerned the company’s subprime loan products were “toxic”, “poison,” and “the most dangerous ... in existence”, and that by selling them the company was facing “catastrophe”. Nevertheless, Countrywide sold billions of dollars worth of the products.

Bank of America rejects the allegations and has said that AIG was a “seasoned” investor that was able to make its own sensible judgement.

The picture painted in the AIG lawsuit is that a number of Countrywide executives were concerned about serious problems with the company’s mortgage selling, and that they failed to stop the practices.

Mozilo’s emails are drawn out in the lawsuit as some of the strongest statements by the company on its processes. In his messages, the chief executive noted that there was a “disregard for process [and] compliance with guidelines”.

Other executives are also shown to have written that they knew of dangers. Countrywide’s risk management director Frank Aguilera told colleagues in an email that the company had an “inability to adequately impose and monitor controls on production operations”. Over 23 percent of its subprime loans were generated as ‘exceptions’, being sold outside the company’s own guidelines.

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