The clueless CEO is so 2002. Instead, Countrywide had a whistleblower-in-chief.

Then Mozilo turns his attention to no-money-down 80/20 mortgages. Responding to his chief operating officer's claim that subprime, zero-down loans were the "milk" of Countrywide's business, Mozilo says sharply that, on the contrary, they are its "poison." On top of this, in the same month (the complaint doesn't provide an exact date), Mozilo complains about the poor quality of Countrywide's borrowers' credit, sputtering that "no premium, no matter how high" can justify giving loans to borrowers with FICO scores below 600.

A few weeks later, on June 1, Mozilo writes that he's become aware that most of Countrywide's toxic pay-option loans are being underwritten on a "reduced documentation" basis-mortgage-speak for "liar loans" that don't verify borrowers' income. The very next day, Mozilo was presented with an internal audit that showed rampant fraud in these loans, with some 30 percent of borrowers claiming income at least 50 percent higher than they'd reported to the IRS. In September, Mozilo again returned to the pay-option fiasco, with a blistering e-mail in which he said that past mortgage history gave Countrywide little guidance about what would happen to these toxic loans as home prices fell and that Countrywide was "flying blind."

Irresponsible loans to folks lying about their income, toxic zero-down deals, pay-option loans with exploding payments: All the misdeeds that brought the mortgage industry down are cataloged in Mozilo's own e-mails. You would think that with all this coming straight from the top, Countrywide would have been racing to change its practices. But the stunning thing is that this is in no way the case. What's most striking about the Mozilo e-mails is not that he continued to present a rosy picture of Countrywide's prospects to investors. That's dishonest but easy to understand. It's that all those complaints didn't actually change how Countrywide did business.

Those reduced-documentation loans? On the one hand, there are Mozilo's objections and Countrywide's startling internal audit. On the other, there is the stark reality of Countrywide's business: Mozilo complains about the reduced-documentation loans in June, but his company continues churning them out (according to a Wall Street Journal analysis, 91 percent of the pay-option loans Countrywide wrote in all of 2006 were low-doc loans). And the general issue of those toxic pay-option loans? Look at Countrywide's numbers for the first quarter of 2007: almost $10 billion in new pay-option loans, on which, in Mozilo's own words, Countrywide is "flying blind." Those low FICO scores? Check out the call with stock analysts from 2007 in which Mozilo sits by while his chief risk officer, John McMurray, explains that Countrywide's borrowers' credit scores are even lower than they were. (He also argues that even loans with FICO scores well below 620—the kinds of loan that Mozilo said won't work out under any circumstances—can be "prime.") Those zero-down loans? In March 2007, Countrywide finally announced that it was getting rid of them—only to clarify a few days later that, actually, it wasn't.

In its basic shape, the case against Mozilo might seem at first to resemble the case brought by Eliot Spitzer against Henry Blodget, then a stock analyst at Merrill Lynch (MER), which was also based on e-mails in which Blodget expressed qualms about what the bank was doing that were at odds with Merrill's public statements. But the similarity is superficial. The difference is that Blodget was an analyst involved in a complicated tug of war among the bank's divisions, genuinely trying to get his colleagues to change their practices. Mozilo, on the other hand, was in charge of the company. So how could Mozilo have such a clear view of what Countrywide was doing wrong and yet let Countrywide keep doing it?

One possibility is that Mozilo was a figurehead, the mortgage industry's public face, and had lost control of his own company. There's a good chance that over the next month this is what Mozilo and his minions will argue. Unlike Enron's Ken Lay, Mozilo doesn't have the option of claiming that he just had no idea of what was going on. But we have no reason to think this is the case. Perhaps more e-mails will emerge that show Mozilo complaining that his objections were being ignored. But, as yet, we don't have them. What we do have is Countrywide elevating David Sambol, the guy who thought that zero-down subprime loans were the milk of the business (and whom the SEC has charged together with Mozilo), to its board of directors—unquestionably with Mozilo's blessing.