R.I.P Indymac…

July 12, 2008

Exactly five months ago — on Feb. 12 — Indymac (IMB) sent this letter to its investors, which it also filed as an 8K. The 8-page letter was unusually frank, with Chairman and CEO Michael Perry stating “2007 was a terrible year for our industry, for Indymac and for you, our owners.” Six weeks later, in the proxy statement, Perry included another letter to investors that said that Indymac “will be a survivor and will emerge as a stronger competitor than ever once the housing and mortgage markets do recover.

Not exactly, as we learned yesterday when federal regulators seized the bank, which the WSJ called the third largest bank failure in U.S. history and the LA Times described as the second biggest. (Anyone know which paper is correct?) Just days ago, in this 8K, Perry asked to have his salary cut by 50%. Now, of course, he’s presumably out of a job.

Back in the early 1990s, the last time banks were failing fairly regularly, the FDIC used to slap up a sign on the bank’s windows notifying account holders that the feds were in charge, which apparently still happens judging by this photo (see above). I also thought it was interesting that the Indymac site, including its extensive REO listings, has also been taken over. That sort of thing didn’t happen the last time around.

The always interesting Mortgage Lender Implode-O-Meter got a whiff of the story on Thursday, and added that Perry left early that day to get a haircut, perhaps because he knew he might face the kleig lights on Friday. And Housing Panic, another interesting site, noted that Sen. Chris Dodd, who heads the Senate Banking Committee, received a $2,300 campaign contribution from Perry.

But wait…there’s more politics going on here. As this Bloomberg story notes, John Reich, the head of the Office of Thrift Supervision blamed Sen. Charles Schumer (D-NY) for causing a run on Indymac. Schumer, never one to mince words, called Reich a political hack, adding that “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.”

UPDATE 7/14: The Indymac site is back up and looks pretty convincing. Indeed, the only hint that you have that it’s not the same bank is the fine print at the bottom of the site which identifies it as Indymac Federal Bank FSB, the tell-tale letters that follow a bank now owned by the government.

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