PennyMac: New Twist To Bankrupting Company, Then Rewarded With Taxpayer Money

March 4, 2009

The Facts

Countrywide Financial was among the first of the scandals in the financial industry. They, along with Merrill Lynch & Citigroup, were in front of congressional committee in February of last year getting a “spanking” for the mess they had created while being handsomely rewarded. I wrote this post on the hearing and suggested there that our tax dollars would bail out these companies while they, the crooks, went off and enjoyed their fortunes. (We know now that’s exactly what happened.) Well, one of them is back in business again, although he was not one of those in front of the committee.

Stanford Kurland, who was the number two man behind Angelo Mozilo at Countrywide, eventually became President of that company. He is now President and CEO of PennyMac (Private National Mortgage Acceptance Company). Kurland started the company up last year with several of his friends from Countrywide. The company is making hundreds of millions of dollars buying up so-called bad loans at pennies on the dollar. There biggest customer so far was the FDIC where they paid just over $43 million for $560 million in delinquent loans. PennyMac will be allowed to keep twenty cents, eventually rising to forty cents, on every dollar they collect. With a smile on his face, Kurland was quoted as saying business was very good.

My View

In this post I suggested that while other countries were properly punishing their corporate crooks we were rewarding ours. Here’s just another example of our good nature.

Some delinquent homeowners are saying that PennyMac has lowered their interest rate allowing them to stay in their homes. I hope these homeowners have learned a lesson from their past and made sure there’s no ramping up of interest rates in a year or two, or a balloon payment scheduled for the future. But knowing these crooks at PennyMac, you can bet there is a “gotcha” in there somewhere. If not for the homeowner, for us taxpayers. These crooks are like the owners of casinos; they make absolutely sure that the odds are on their side, and in this case, probably 110% sure.

I’m going to make another prediction here; there will come a time when PennyMac will have to be bailed out with taxpayer money and Kurland & his friends will once again ride off into the sunset with their hundreds of millions in rewards. Once a corporate crook always a corporate crook. For these guys, greed is too lucrative to give up.