What do IndyMac and Countrywide have in common? Double speak and CEO public statements that mean little or nothing. Some call it outright lying to the public and stockholders. Just two months ago, IndyMac’s CEO was calling the plunge in the companys stock unwarranted, even as house price declines accelerated. Given the decline in our stock price, some people have questioned Indymacs survivability in the current environment, he wrote back on April 30, with IndyMac shares trading at $3.25 apiece. I am here to tell you that I believe we have turned a corner and that our business is improving. The same thing happened at Countrywide.
As Countrywide CEO Mozillo spoke last summer he said liquidity was not a problem, touting the “$48 billion” available to the company. If you remember June, July, and August of 2007 the mortgage picture was getting very ugly. Granted, one cannot expect a CEO to say anything that would reflect poorly on the company staock, but there is a fine line between promotion and pulling the wool over the eyes of investors. A classic example is William F. Aldinger of Household International. Speaking to employees at the final annual stockholder meeting before HSBC bought the company, Aldinger said “We are not predatory lenders.” Days later the largest predatory lending suit even seen in the United States was filed against Household International.
Some people like to say “If their lips are moving they are lying.”