Indymac just went TU, 1929 anyone?

[Matthew]

Indymac will be seized and controlled by the FDIC, sux if you had more than 100k in your bank account! Looks like at least 1 billion in assets that will be lost forever!

http://money.cnn.com/2008/07/11/news/co ... 2008071120

[Lake Hills Renter]

Excuse my economics ignorance, but if 1 billion just evaporated from IndyMac, isn't that 1 billion worth of deflation we just had, as it in that money is gone for good?

[rose-colored-coolaid]

[TJ_98370]

Okay. I think I found the problem........

".....Mr. Reich (director of the Office of Thrift Supervision) said Sen. Schumer gave the bank a "heart attack"....."



IndyMac Bank, a prolific mortgage specialist that helped fuel the housing boom, was seized Friday by federal regulators, in the third-largest bank failure in U.S. history.

IndyMac is the biggest mortgage lender to go under since a fall in housing prices and surge in defaults began rippling through the economy last year -- and it likely won't be the last. Banking regulators are bracing for a slew of failures over the next year as analysts say housing prices have yet to bottom out.

The collapse is expected to cost the Federal Deposit Insurance Corp. between $4 billion and $8 billion, potentially wiping out more than 10% of the FDIC's $53 billion deposit-insurance fund.....

........The director of the Office of Thrift Supervision, John Reich, blamed IndyMac's failure on comments made in late June by Sen. Charles Schumer (D., N.Y.), who sent a letter to the regulator raising concerns about the bank's solvency. In the following 11 days, spooked depositors withdrew a total of $1.3 billion. Mr. Reich said Sen. Schumer gave the bank a "heart attack."

"Would the institution have failed without the deposit run?" Mr. Reich asked reporters. "We'll never know the answer to that question."

Mr. Schumer quickly fired back. "If OTS had done its job as regulator and not let IndyMac's poor and loose lending practices continue, we wouldn't be where we are today," Sen. Schumer said. "Instead of pointing false fingers of blame, OTS should start doing its job to prevent future IndyMacs.".......

.........The failure could be felt across the entire banking industry, as the FDIC will likely have to raise insurance assessments for all banks to build up government reserves. "It takes a big chunk out of the FDIC insurance fund," said Chip MacDonald, a banking lawyer at law firm Jones Day. He said that if the FDIC hikes insurance fees, that will add to already-intense pressure on bank profits.

The OTS and FDIC didn't secure any outside firm to acquire the bank's assets. The FDIC will temporarily run the bank through a new bank it has created, called IndyMac Federal Bank, FSB..

[david_mcmanus]

I wonder if we could actually cause WM to go under? I've got a flew plans for that big building downtown.

[rose-colored-coolaid]

[TJ_98370]

.
And the moral of this fun story is - If officials from the Office of Thrift Supervision want to talk to you on a Friday, be sure to have your stuff moved out of your office by the following Monday.
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......The collapse of IndyMac, one of the nation's largest mortgage lenders, was the most vivid example to date of the dangers now confronting the nation's banks and their investors........

.......How could this happen? There has been a lot of finger-pointing. The Office of Thrift Supervision, the federal regulator that oversaw IndyMac, contends that Senator Charles E. Schumer, Democrat of New York, caused a panic among customers by issuing dire warnings about the bank.

Mr. Schumer maintains that the Office of Thrift Supervision was slow to spot the problems at IndyMac, an offshoot of the Countrywide Financial Corporation, the giant mortgage company that has come to symbolize many of the excesses of the subprime era.

But behind the political pyrotechnics is a simple truth: Executives at IndyMac, like many people on both Wall Street and Main Street, apparently never dreamed that home prices might fall. To the contrary, IndyMac made many loans on terms that implicitly assumed prices would keep rising.....

......As long as home prices continued to go up, the company's strategy was very lucrative for executives, employees and shareholders. Analysts say the boom perpetuated an insatiable hunger for mortgages and a complacency about the risks they posed.
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"The sales culture took over, and the sales division really drove the company," said Paul J. Miller Jr., an analyst at Friedman, Billings, Ramsey.....

......Most of this decade was a golden era for IndyMac, whose profits grew threefold from 2001 to 2006. The company specialized in alternative-A, or alt-A, mortgages, which are made to borrowers with good credit but are not quite as conservative as the prime loans eligible to be bought by Fannie Mae and Freddie Mac, the mortgage giants.

For a long time, Mr. Perry (IndyMac CEO) disputed the growing belief that the problems in subprime mortgages would infect alt-A loans.......

.......While alt-A loans have, in fact, defaulted at much lower rates than subprime mortgages, they have nonetheless proved problematic. IndyMac's biggest problem was a $10 billion portfolio of loans that it had been unable to sell last summer when credit markets froze up.....

......By late June, IndyMac executives realized no savior would emerge soon, and the Office of Thrift Supervision told the bank it was no longer "well capitalized."....

......IndyMac executives suspected the end was near even before the regulators turned up. Examiners do not warn banks they are coming, but they typically take over failing institutions on Fridays so they can have a weekend to put things in order and reopen under government control on Monday.

As the lines grew outside IndyMac branches during the week of July 7, Mr. Perry talked with an Office of Thrift Supervision official to assess the situation.

"We'll talk to you on Friday," the official said, according to one bank official briefed on the call. As word of the call spread through IndyMac, executives began packing their personal belongings.
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