Like Franklin Raines (#40) and Jamie Gorelick (#26), Kathleen Brown is another example of politically connected cronyism run amok. Kathleen Brown worked for Goldman Sachs in California and held a senior position in “municipal finance.” Prior to working for Goldman, she had also served as treasurer for the state of California. Amazingly, the fact that both her father and brother had been governor of California, and she had served as the state’s treasurer must not have been considered a conflict of interest to either Goldman Sachs or her despite working in Goldman’s municipal finance department!
The dearth of ethics in investment banking and government aside, as far as the financial crisis is concerned, Kathleen Brown’s primary importance is her service on the board of mortgage lender Countrywide Financial. Countrywide was no mere mortgage lender; it was the largest mortgage lender in the United States. In March 2007 – just as the housing market started to visibly come apart at the seams, Brown resigned her position from Countrywide’s board. In announcing her decision to step down from the board Countrywide CEO Angelo Mozilo stated, “Since joining the Board in 2005, Kathleen has also made significant contributions to the company’s governance, risk management and strategic growth initiatives.” That was one person’s opinion. Another opinion was provided by Corporate Library, an independent research firm that grades corporate governance. They gave Countrywide’s board – and by extension Kathleen Brown - an “F” for governance. In fact, Nell Minow, the editor at Corporate Library, said that Countrywide would have received a lower grade if there was one.
Fortunately for Kathleen Brown’s reputation, her brother Jerry, then California attorney general, had the good sense to wait a little after her March 2007 resignation from Countrywide’s board before filing suit against Countrywide in June 2008. Further greasing the skids of her low-profile resignation from Countrywide – billions in bad mortgage losses notwithstanding – might be the fact that Brown’s second husband is Van Gordon Sauter, the former head of CBS News. Kathleen Brown is hardly the only politically connected insider to serve on the board of a company at the center of the financial crisis. Richard Holbrooke – who effortlessly bounced between Wall Street, he worked for Lehman Brothers, and the State Department – was a member of AIG’s board when AIG crashed and burned. Unsurprisingly, in the same way Kathleen Brown never faced any criticism for her role at Countrywide, criticism of AIG and its management never extended to the politically connected Holbrooke either.
See Jamie Gorelick (#26) and Franklin Raines (#40) for more cronyism.