Well.....well.....Will the Chickens Come Home To Roost

[xrayzebra]

Seems like one of the big boys of the Dimm-o-craps might have a little something more to whine about. Wonder how the Dimms will twist this to blame Bush.


IndyMac Seized by U.S. Regulators; Schumer Blamed for Failure

By Ari Levy and David Mildenberg
Enlarge Image/Details

July 12 (Bloomberg) -- IndyMac Bancorp Inc. became the second- biggest federally insured financial company to be seized by U.S. regulators after a run by depositors left the California mortgage lender short on cash.

The Federal Deposit Insurance Corp. will run a successor institution, IndyMac Federal Bank FSB, starting next week, the Office of Thrift Supervision said in an e-mail yesterday. The regulator blamed U.S. Senator Charles Schumer for creating a ``liquidity crisis'' after a letter on June 26, in which he expressed concern that the bank may fail.

The Pasadena, California-based lender specialized in so-called Alt-A mortgages, which didn't require borrowers to provide documentation on their incomes. The demise adds to the crisis caused by the subprime collapse and may mean regulators will have to raise more money to support the federal deposit insurance program that repays customers when a bank fails.

``IndyMac is the vanguard, the precursor of more stuff coming,'' said Christopher Whalen, managing director of Institutional Risk Analytics, a market research company in Torrance, California. ``It's not surprising to see IndyMac resolved. What you have to ask is what's coming next. It's going to be a wave of medium to bigger-than-medium institutions.''

IndyMac's home state, where Countrywide Financial Corp. was also located before it was bought last week, has been among the hardest hit by foreclosures. California ranked second among U.S. states, with one foreclosure filing for every 192 households in June, 2.6 times the national average.

IndyMac's Losses

The lender racked up almost $900 million in losses as home prices tumbled and foreclosures climbed to a record. IndyMac becomes the largest OTS-regulated savings and loan to fail, according to the FDIC.

Mortgages serviced by IndyMac will be turned over to the FDIC and the regulator will be reaching out to customers immediately, Chairman Sheila Bair said on a conference call yesterday. Customers will have access to funds this weekend via automated teller machines and electronically and by phone starting next week.

The FDIC intends to sell IndyMac within 90 days, preferably as a single entity, Bair said. If that doesn't work, the lender will be sold off in pieces, she said.

After peaking at $50.11 on May 8, 2006, IndyMac shares lost 87 percent of their value in 2007 and another 95 percent this year. The stock fell 3 cents to 28 cents yesterday.

Schumer's Comments

IndyMac came under fire last month from Schumer, the Democrat from New York, who said lax lending standards and deposits purchased from third parties left it on the brink of failure. During the 11 business days after Schumer explained his concerns in a June 26 letter, depositors withdrew more than $1.3 billion, the OTS said.

``This institution failed due to a liquidity crisis,'' OTS Director John Reich said in the statement. ``Although this institution was already in distress, I am troubled by any interference in the regulatory process.''

Schumer blamed IndyMac's own actions and regulatory failures for the bank's seizure.

``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,'' Schumer, a New York Democrat, said in an e-mail yesterday. ``Instead of pointing false fingers of blame, OTS should start doing its job to prevent future IndyMacs.''

The failure will cost the federal deposit insurance program about $4 billion to $8 billion, the FDIC said. Some $1 billion of uninsured deposits are held by about 10,000 customers, the FDIC said. Those depositors will get an ``advance dividend'' equal to half the uninsured amount, according to the statement.

Firing Workers

The FDIC insures $100,000 per depositor per insured bank, according to the agency's Web site. Customers may qualify for more coverage depending on the type of accounts they own, and some retirement accounts have a $250,000 limit.

IndyMac announced on July 7 that it was firing half its employees. The lender agreed to sell most of its retail mortgage branches to Prospect Mortgage, giving the Northbrook, Illinois based-company more than 60 branch offices with 750 employees. IndyMac also has a retail bank network with 33 branches and $18 billion in deposits, mostly insured by the FDIC.

The company was started in 1985 by Countrywide founders Angelo Mozilo and David Loeb under the name Countrywide Mortgage Investments. In 1999, it converted into a bank from a real estate investment trust. That year, Michael Perry replaced Mozilo as chief executive officer.

Under Perry's leadership, profit more than doubled from $118 million in 2000 to $343 million in 2006 amid the housing boom. The stock more than tripled over that stretch.

Perry will not be continuing with the new FDIC-controlled institution, while other executives will be retained, Bair said. The FDIC's John Bovenzi will assume the CEO role.

To contact the reporter on this story: Ari Levy in San Francisco at [email protected]; David Mildenberg in Charlotte at [email protected].
Last Updated: July 12, 2008 00:23 EDT

[scott]

Wow, I used to work for OTS way back when. Of note is that OTS has been recommended to essentially be dissolved via a merger with the OCC by Treasury Secretary Paulson. The failure of a Thrift this size (looked it up, $32 billion at their last regulatory reporting filing on 3/31) certainly isn't going to help OTS make a case to remain in existence. On the flip side, maybe further chaos in the thrift industry waters will highlight the need for OTS supervision, as opposed to lumping these types of institutions in with commercial banks.

Schumer's comments were rather reckless and I have little doubt they expeditied the process of the Thrift's failure, but to say its Schumer's "fault" the Thrift failed is rather silly as well.

Interesting case given the circumstances.

[2centsworth]

What were the rating agencies for the underlying CMOs thinking?

[boutons_]

http://www.groupnewsblog.net/2008/07/schumer-not-to-blame-for-indymac.html

[BradLohaus]

This is the second biggest bank failure in US history.

[Nbadan]

..but...but...it's not the fault of the banking crisis created from years of mortgage lender fraudulent loans and the lack of legislative oversight by the Bush administration and the do-nothing Congress....it's all Charles Schumer's fault for saying that these banks, along with Fanny and Freddy Mac could fail!

Morons......

[GEICO Caveman]

I haven't paid my credit card in nine months. I hope I'm not contributing to this bank failure you all speak of.

[JoeChalupa]

You won't hear any whining from me.

[xrayzebra]

..but...but...it's not the fault of the banking crisis created from years of mortgage lender fraudulent loans and the lack of legislative oversight by the Bush administration and the do-nothing Congress....it's all Charles Schumer's fault for saying that these banks, along with Fanny and Freddy Mac could fail!

Morons......

Bush runs the legislature? Aren't we arguing the point that they are an independent branch of government. Schumer is the one who put the information out on the street. And no run on the bank had occured until he did. But you know best.

[ChumpDumper]

:lol

Their ridiculous stock losses over the past two years were public knowledge. They were resorting to paying out extremely high interest rates to depositors to try to keep the money coming in. If Schumer's letter was the final nail in the coffin, so be it. Shitty banks should fail. Even the folks dumb enough to keep more than $100k in IndyMac will probably get most if not all of their money back, so I'm not shedding a tear for depositors who weren't part of the run.

[xrayzebra]

^^nice apology for Schumer. One of your hero's I guess. Oh, and you wont mind when they use your tax money to bail them out.

[ChumpDumper]

He didn't say anything that hadn't already been decided by the market the past two years.

Did you have money in IndyMac?

Did you invest in its stock?

Did you think it was a great, stable bank with sound lending practices?

Please answer with a yes or no.

[xrayzebra]

He didn't say anything that hadn't already been decided by the market the past two years.

Did you have money in IndyMac?

Did you invest in its stock?

Did you think it was a great, stable bank with sound lending practices?

Please answer with a yes or no.

:lmao:lmao

[ChumpDumper]

So that is no, no and no.

[PixelPusher]

I blame the health inspector for having to shut down my moldy, rat infested restaurant



I was doing just fine until that Doctor told me I have cancer. Stupid Doctor!

[ElNono]

Wait, Schumer racked up $900 million in debt?

Or you're bitching because he spoke with the truth?

[xrayzebra]

PixelPusher= He just yelled "fire" in a crowded theater, but it wasn't a problem. All the people weren't killed




PixelPusher= When he hollarded the sky is falling, the sky is falling he was just pointing out the obvious. That is wasn't really.

[boutons_]

"some say" the right is orchestrating the blame-Schumer campaign.

http://www.huffingtonpost.com/dave-johnson/right-develops-economy-bl_b_112402.html?view=print

One has to be profoundly stupid to believe Shumer killed this dead bank, but profoundly stupid is the habitual audience of right-wing slime.

[boutons_]

dubya to request rescue of Fannie and Freddie

http://www.nytimes.com/2008/07/14/washington/14fannieweb.html?hp

It's all Schumer's fault!!

http://www.youtube.com/watch?v=hMenB9Ywh2Q

[boutons_]

http://www.nytimes.com/2008/07/14/business/14bank.html

http://graphics8.nytimes.com/images/misc/logoprinter.gif (http://www.nytimes.com/)
http://graphics8.nytimes.com/ads/spacer.gifhttp://graphics8.nytimes.com/ads/fox/printerfriendly.gifhttp://graphics8.nytimes.com/ads/fox/2008/FSLwidget.gif (http://www.nytimes.com/adx/bin/adx_click.html?type=goto&page=www.nytimes.com/printer-friendly&pos=Position1&sn2=336c557e/4f3dd5d2&sn1=46a9b98b/89aac644&camp=foxsearch2008_emailtools_810905d-nyt5&ad=FSLwidget.gif&goto=http://foxsearchlight.com/networkwidget/index.php)

July 14, 2008

Analysts Say More Banks Will Fail

By LOUISE STORY (http://topics.nytimes.com/top/reference/timestopics/people/s/louise_story/index.html?inline=nyt-per)

As home prices continue to decline and loan defaults mount, federal regulators are bracing for dozens of American banks to fail over the next year.

But after a large mortgage lender in California collapsed late Friday, Wall Street analysts began posing two crucial questions: Just how many banks might falter? And, more urgently, which one could be next?

The nation’s banks are in far less danger than they were in the late 1980s and early 1990s, when more than 1,000 federally insured institutions went under during the savings-and-loan crisis. The debacle, the greatest collapse of American financial institutions since the Depression, prompted a government bailout that cost taxpayers about $125 billion.

But the troubles are growing so rapidly at some small and midsize banks that as many as 150 out of the 7,500 banks nationwide could fail over the next 12 to 18 months, analysts say. Other lenders are likely to shut branches or seek mergers.

“Everybody is drawing up lists, trying to figure out who the next bank is, No. 1, and No. 2, how many of them are there,” said Richard X. Bove, the banking analyst with Ladenburg Thalmann, who released a list of troubled banks over the weekend. “And No. 3, from the standpoint of Washington, how badly is it going to affect the economy?”

Many investors are on edge after federal regulators seized the California lender, IndyMac Bank, one of the nation’s largest savings and loans, last week. With $32 billion in assets, IndyMac, a spinoff of the Countrywide Financial Corporation, was the biggest American lender to fail in more than two decades.

Now, as the Bush administration grapples with the crisis at the nation’s two largest mortgage finance companies, Fannie Mae (http://topics.nytimes.com/top/news/business/companies/fannie_mae/index.html?inline=nyt-org) and Freddie Mac (http://topics.nytimes.com/top/news/business/companies/freddie_mac/index.html?inline=nyt-org), a rush of earnings reports in the coming days and weeks from some of the nation’s largest financial companies are likely to provide more gloomy reminders about the sorry state of the industry.

The future of Fannie Mae and Freddie Mac is vital to the banks, savings and loans and credit unions, which own $1.3 trillion of securities issued or guaranteed by the two mortgage companies. If the mortgage giants ever defaulted on those obligations, banks might be forced to raise billions of dollars in additional capital.

The large institutions set to report results this week, including Citigroup (http://topics.nytimes.com/top/news/business/companies/citigroup_inc/index.html?inline=nyt-org) and Merrill Lynch (http://topics.nytimes.com/top/news/business/companies/merrill_lynch_and_company/index.html?inline=nyt-org), are in no danger of failing, but some are expected to report more multibillion-dollar write-offs.

But time may be running out for some small and midsize lenders. They vary in size and location, but their common woe is the collapsed real estate market and souring mortgage loans. Most of these banks are far smaller than the industry giants that have drawn so much scrutiny from regulators and investors.

Still, only six lenders have failed so far this year, including IndyMac. In 1994, the Federal Deposit Insurance Corporation (http://topics.nytimes.com/top/reference/timestopics/organizations/f/federal_deposit_insurance_corp/index.html?inline=nyt-org) listed 575 banks that it considered to be troubled. As of this spring, the agency was worried about just 90 banks. That number may go up in August, when the government releases an updated list.

“Failed banks are a lagging indicator, not a leading indicator,” said William Isaac, who was chairman of the F.D.I.C. in the early 1980s and is now the chairman of the Secura Group, a finance consulting firm in Virginia. “So you will see more troubled, more failed banks this year.”

And yet IndyMac, one of the nation’s largest mortgage lenders, was not on the government’s troubled bank list this spring — an indication that other troubled banks may be below the radar.

The F.D.I.C. has $53 billion set aside to reimburse consumers for deposits lost at failed banks. IndyMac will eat up $4 billion to $8 billion of that fund, the agency estimates, and that could force it to raise more money from the banks that it insures.

The agency does not disclose which banks it thinks are troubled. But analysts are circulating their own lists, and short sellers — investors who bet against stocks — are piling on. In recent weeks, the share prices of some regional banks, like the BankUnited Financial Corporation (http://topics.nytimes.com/top/news/business/companies/bankunited-financial-corporation/index.html?inline=nyt-org), in Florida, and the Downey Financial Corporation (http://topics.nytimes.com/top/news/business/companies/downey-financial-corporation/index.html?inline=nyt-org), in California, have stumbled hard amid concern about their financial health. A BankUnited spokeswoman said the lender had largely avoided risky subprime loans.

In his “Who Is Next?” report over the weekend, Mr. Bove listed the fraction of loans at banks that are nonperforming, meaning, for example, that the assets have been foreclosed on or that payments are 90 days past due. He came up with what he called a danger zone, which was a percentage above 5 percent. Seven banks fell in this category.

An important issue for the regional and community banks will be whether they have managed to sell their riskiest loans to Wall Street firms.
And the government may have fewer failures than in the past because private investment funds might buy some troubled lenders. Regulators are considering rule changes that would allow private equity firms to buy larger shares of banks, and several prominent investors, like Wilbur Ross (http://topics.nytimes.com/top/reference/timestopics/people/r/wilbur_l_jr_ross/index.html?inline=nyt-per), have raised funds to leap in.

Eric Dash contributed reporting.

[Nbadan]

Federally insured deposits ain't what they used to be......

Some IndyMac Customers Have Trouble Depositing Checks
POSTED: 7:52 am PDT July 18, 2008


The frustration didn't end for some IndyMac customers when they finally were able to withdraw their funds from the failing Southern California bank seized last week by federal regulators.

Some people have run into more problems when they tried to deposit IndyMac cashier checks at other banks.

Sheryl MacPhee said she waited in line two hours Tuesday at an IndyMac branch in San Marino to liquidate a certificate of deposit. But when she took it to a Washington Mutual branch in South Pasadena to deposit, she said a manager told her their new policy was not to accept IndyMac checks. If the customer insisted, she said she was told, it could take eight weeks or more to access the full amount.

"Sure, IndyMac will give you a check," MacPhee told the Los Angeles Times, "but what good is it if no other institution will accept it?"

WaMu spokeswoman Olivia Riley said her bank is accepting IndyMac checks, "but depending on the specifics, funds will be subject to an extended hold period."

IndyMac CEO John F. Bovenzi said he is "very concerned about it."

"I don't believe there's any reason that IndyMac Federal Bank should be treated differently than any other bank. I've expressed my concerns to heads of some of the other large banks in the area," said IndyMac CEO John F. Bovenzi.

Officials at the Office of Thrift Supervision said that regulating agency is investigating complaints about the checks. .....

Linky (http://www.nbc11.com/news/16920647/detail.html?rss=bay&psp=news)

[Wild Cobra]

I really wish people would stop fretting over this. We had about a 1.5% default rates on loans before this so called disaster which is made up by demoncraps. It's up some, up to 2%.

My God people...

Defaults have been happening for years. The fear factor that the lemmings believe is what is making the banks fail. If people just went on with business as usual, and stop pulling out of the markets from the artificial fear, then this wouldn't be happing.


The fear is making it's own problem that otherwise wouldn't exist.

[Oh, Gee!!]

This is the second biggest bank failure in US history.

but good ol' Xray is getting a big laugh out of the situation. Way to be, Xray.

[Wild Cobra]

This is the second biggest bank failure in US history.

Maybe it is, but it is the banks fault for not managing thier assets right. Now fear of the lending rates and situations fuel the withdrawl of investor assets, but still, if they fail. Let them. Bailout = continued future irresponsibility.

[xrayzebra]

but good ol' Xray is getting a big laugh out of the situation. Way to be, Xray.

Naw, I am getting the same old feeling. You know the dimm-o-craps cause a bunch of problems, then:downspin: look up at everyone and say: I didn't do it, mommy. It was them.