Bank of America CEO Brian Moynihan Apparently Can't Remember Anything
Matt Taibbi, Rolling Stone
Thank God for Bank of America CEO Brian Moynihan. If you're a court junkie, or have the misfortune (as some of us poor reporters do) of being forced professionally to spend a lot of time reading legal documents, the just-released Moynihan deposition in MBIA v. Bank of America, Countrywide, and a Buttload of Other Shameless Mortgage Fraudsters will go down as one of the great Nixonian-stonewalling efforts ever, and one of the more entertaining reads of the year.
In this long-awaited interrogation – Bank of America has been fighting to keep Moynihan from being deposed in this case for some time – Moynihan does a full Star Trek special, boldly going where no deponent has ever gone before, breaking out the "I don't recall" line more often and perhaps more ridiculously than was previously thought possible. Moynihan seems to remember his own name, and perhaps his current job title, but beyond that, he'll have to get back to you.
The MBIA v. Bank of America case is one of the bigger and weightier lawsuits hovering over the financial world. Prior to the crash, MBIA was, along with a company called Ambac, one of the two largest and most reputable names in what's called the "monoline" insurance business.
The monolines sell a kind of investment insurance – if you invest in a municipal bond or in mortgage-backed securities backed or "wrapped" by a monoline, you have backing in case the investment goes south. If a municipality defaults on its bond payments, or homeowners in a mortgage-backed security default on their mortgage payments, the investors in those instruments can collect from the monoline insurer.
When companies like Countrywide issued their giant piles of crappy subprime mortgages and then chopped them up and turned them into AAA-rated securities to sell to suckers around the world, they often had these mortgage-backed securities insured by companies like MBIA or Ambac, to make their customers feel doubly safe about investing in their product.
The pitch firms like Countrywide made went like this: not only are these mortgages triple-A rated by reputable ratings agencies like Moody's, they're fully insured by similarly reputable insurance companies like MBIA. You can't lose!
With protection like that, why shouldn't your state pension fund or foreign trade union buy billions' worth of these mortgage-backed products? It's not like it would ever turn out that Countrywide made those products by trolling the cities of America stuffing mortgages in the pockets of anything with a pulse.
After 2007-8, when all of those mortgage-backed securities started blowing up, suddenly all of those insurance companies started having to pay out billions in claims. Ambac went bankrupt and MBIA was downgraded from AAA to near-junk status. The entire monoline industry was shattered.
The analogy one could make is that Countrywide sold a million flood-insured houses in New Orleans and Biloxi even though they could already see Katrina gathering in the Caribbean. Then, after the storm, the insurers decided to sue.
MBIA sued Bank of America (which acquired Countrywide in 2008), claiming that Countrywide lied to MBIA about its supposedly strict underwriting standards, when in fact the firm was cranking out mortgages hand over fist, without doing any real due diligence at all. (Whether the monolines should have known better, or its agents perhaps did know better and sold the mountains of insurance anyway, is another matter). In its suit, MBIA claimed that Countrywide turned itself into a veritable machine of mortgage approvals:
Countrywide Home Loans' senior management imposed intense pressure on underwriters to approve mortgage loans, in some instances requiring underwriters to process 60 to 70 mortgage loan applications in a single day and to justify any rejections…
As a result of all of this, MBIA got stuck insuring a Himalayan mountain range of dicey mortgages. When the securities those mortgages backed started to fail, MBIA ended up paying out $2.2 billion in claims, helping crack the hull of the formerly staid, solid, AAA-rated firm.
Suits like this have the whole financial world on edge. The possibility that the banks might still have to pay gigantic claims to companies like MBIA (among a wide range of other claimants) has left Wall Street in a state of uncertainty about the future of some of the better-known, Too-Big-To-Fail companies, whose already-strained balance sheets might eventually be rocked by massive litigation payouts.
In the case of Bank of America, MBIA has long wanted to depose Moynihan because it was precisely Moynihan who went public with comments about how B of A was going to make good on the errors made by its bad-seed acquisition, Countrywide. "At the end of the day, we'll pay for the things Countrywide did," was one such comment Moynihan made, in November of 2010.
As it turns out, Moynihan was deposed last May 2. But the deposition was only made public this week, when it was filed as an exhibit in a motion for summary judgment. In the deposition, attorney Peter Calamari of Quinn Emmanuel, representing MBIA, attempts to ask Moynihan a series of questions about what exactly Bank of America knew about Countrywide's operations at various points in time.
Early on, he asks Moynihan if he remembers the B of A audit committee discussing Countrywide. Moynihan says he "doesn't recall any specific discussion of it."
He's asked again: In the broadest conceivable sense, do you recall ever attending an audit committee meeting where the word Countrywide or any aspect of the Countrywide transaction was ever discussed? Moynihan: I don't recall.
Calamari counters: It's a multi-billion dollar acquisition, was it not?
Moynihan: Yes, it was. Well, isn't that the kind of thing you would talk about?
Moynihan: not necessarily . . .
This goes on and on for a while, with the Bank of America CEO continually insisting he doesn't remember ever talking about Countrywide at these meetings, that you'd have to "get the minutes." Incredulous, Calamari, a little sarcastically, finally asks Moynihan if he would say he has a good memory.
"I would – I could remember things, yes," Moynihan deadpans. "I have a good memory."
Calamari presses on, eventually asking him about the state of Countrywide when Moynihan became the CEO, leading to the following remarkable exchange, in which the CEO of one of the biggest companies in the world claims not to know anything about the most significant acquisition in the bank's history (emphasis mine):
Q: By January 1st, 2010, when you became the CEO of Bank Of America, CFC – and I'm using the initials CFC, Countrywide Financial Corporation – itself was no longer engaged in any revenue-producing activities; is that right?
Moynihan: I wouldn't be the best person to ask about that because I don't know.
There are no sound effects in the transcript, but you can almost hear an audible gasp at this response. Calamari presses Moynihan on his answer.
"Sir," he says, "you were CEO of Bank Of America in January, 2010, but you don't know what Countrywide Financial Corporation was doing at that time?"
In an impressive display of balls, Moynihan essentially replies that Bank of America is a big company, and it's unrealistic to ask the CEO to know about all of its parts, even the ones that are multi-billion-dollar suckholes about which the firm has been engaged in nearly constant litigation from the moment it acquired the company.
"We have several thousand legal entities," is how Moynihan puts it. "Exactly what subsidiary took place [sic] is not what you do as the CEO. That is [sic] other people's jobs to make sure."
The exasperated MBIA lawyer tries again: If it's true that Moynihan somehow managed to not know anything about the bank's most important and most problematic subsidiary when he became CEO, well, did he ever make an effort to correct that ignorance? "Do you ever come to learn what CFC was doing?" is how the question is posed.
"I'm not sure that I recall exactly what CFC was doing versus other parts," Moynihan sagely concludes.
The deposition rolls on like this for 223 agonizing pages. The entire time, the Bank of America CEO presents himself as a Being There-esque cipher who was placed in charge of a Too-Big-To-Fail global banking giant by some kind of historical accident beyond his control, and appears to know little to nothing at all about the business he is running.
In the end, Moynihan even doubles back on his "we'll pay for the things Countrywide did" quote. Asked if he said that to a Bloomberg reporter, Moynihan says he doesn't remember that either, though he guesses the reporter got it right.
Well, he's asked, assuming he did say it, does the quote accurately reflect Moynihan's opinion?
"It is what it is," Moynihan says philosophically.
There's nothing surprising about any of this – it's natural that a Bank of America executive would do everything he could to deny responsibility for Countrywide's messes. But that doesn't mean it's not funny. By about the thirtieth "I don't recall," I was laughing out loud.
It's also more than a little infuriating. In the pre-crash years, Countrywide was the biggest, loudest, most obvious fraud in a marketplace full of them, and the legion of complainants who've since sued (ranging from the U.S. government to Norway's Sovereign Wealth Fund to state pension funds in Iowa and Oregon, among others) have found it painstaking work trying to get Bank of America to do the right thing and pay back the money its subsidiary took in its various ripoffs. And with executives boasting such poor memories, this story is going to drag on and on even longer.