This week I was reading the news and checked Wikipedia for the list of largest bank runs and one from 2007 caught my eye. There’s a single line:
In early August 2007, the American firm Countrywide Financial suffered a bank run as a consequence of the subprime mortgage crisis.
I hadn’t heard of or completely forgot about Countrywide Financial. But about six months after Countrywide fell big banks — Bear Stearns, IndyMac, Washington Mutual and Wachovia — all suffered bank runs as part of the 2008 financial crisis portrayed in the movie The Big Short.
The co-founder of Countrywide Financial, Angelo Mozilo made $470 million from the business between 2001 and 2006. In the twelve months leading up to the crash of his firm he sold $129 million worth of stock. Despite being responsible for the financial crisis and being charged with insider trading and securities fraud by the SEC he settled, paid a fine and bafflingly didn’t have to admit any wrongdoing. The government completely dropped it’s criminal investigation and the only punishment was a $20 million fine. Countrywide was sold to Bank of America for $4 billion in all stock. The true cost was quite a bit more though for Bank of America because they had to pay $17 billion to settle claims against it from Countrywide’s sale of toxic mortgage-linked securities. The rich got richer and the government stepped in to bail everybody else out. No one went to jail.
The 2008 crisis drove further consolidation in the American banking sector. Bank of America gobbled up Countrywide, Wells Fargo acquired Wachovia and JPMorgan Chase scooped up Washington Mutual. The result was fewer, more powerful banks and less competition. One positive outcome was that legislators passed the Dodd–Frank Wall Street Reform and Consumer Protection Act to make sure our financial system was secure from gambling financiers and the crooks that drove Countrywide to massive profits followed by swift destruction.