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Hold the presses! A human being gets blamed in the financial crisis

October 23, 2013|By Michael Hiltzik
  • Rebecca Mairone, formerly of Countrywide, in 2010.
Rebecca Mairone, formerly of Countrywide, in 2010. (Bloomberg )

The vacuum at the center of the few federal lawsuits brought against banks in connection with the 2008 financial crisis is that actual people seldom seem to be held responsible for the alleged wrongdoing. It's as if the fraud and misrepresentation charged in these cases fell upon the banks from the skies, like interstellar lichens attached to meteorites.

Things were different Wednesday in Manhattan federal court, where a jury found Rebecca Mairone, a former executive at Countrywide Financial, liable for a fraudulent mortgage program that may have cost U.S. taxpayers more than $10 million.

Bank of America, which acquired Countrywide in a crisis-driven bailout in 2008, was the jury's main target and was also found liable. Civil penalties will be decided later by U.S. District Judge Jed Rakoff.  

The government's lawsuit  alleged that Countrywide created a program dubbed "The Hustle," for "high speed swim lane," to pump up the volume of mortgages for sale to the government-sponsored firms Fannie Mae and Freddie Mac. Mairone was in charge of the program, according to legal papers filed in connection with the case. (She's now a mortgage executive at JPMorgan, which has its own issues with the feds in the mortgage mess.)

Federal prosecutors alleged that Mairone's program systematically removed quality controls from the loan-approval process, replacing experienced underwriters with "unqualified" loan processors who couldn't catch errors and misrepresentations. Almost anything that might slow down the loan approval process was jettisoned. The rate of defective loans uncovered by Fannie and Freddie soared.

Although the loans in question were originated and sold before BofA bought Countrywide, the prosecutors said BofA continued Countrywide's practice of refusing to repurchase the defective loans, as it was required to do. 

The jury verdict appears to be the first time a major U.S. bank has been found liable in connection with financial crisis chicanery, according to the Wall Street Journal. It looks like one of the rare cases in which an individual is found liable for the wrongdoing. Mairone's name was hauled into the spotlight by a Countryside whistleblower, Edward O'Donnell, who said she "took control" of the Hustle and that he was pushed aside when he objected to the program.

Do we need to connect the deeds with the faces on financial crisis prosecutions?

Reach me at @hiltzikm on Twitter, on Facebook or by email.


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