Comments on: Fannie, Freddie, and Indy

By: joe jones

joe jones — Sun, 13 Jul 2008 01:55:41 +0000

[...] [...]

By: Bridget Magnus » IndyMac Follow-up

Bridget Magnus » IndyMac Follow-up — Sat, 12 Jul 2008 22:01:53 +0000

[...] night the FDIC took over IndyMac. I wrote more about that for The Moderate Voice this [...]

By: StockBoySF

StockBoySF — Sat, 12 Jul 2008 21:46:43 +0000

No one should blame Schumer for speaking the truth about an imminent bank failure. If he hadn't spoken up then my sense is that the way the market is going IndyMac would have failed in another month anyway…. as mikkel pointed out, Schumer's comments were the straw that broke the camels back.

Though to be honest it wouldn't surprise me that Schumer probably already knew the back was already broken and the Fed was about to step in anyway…. I think it was a good idea that he prepared the public for the announcement so it wouldn't come as a complete surprise to the already roiling financial markets with regards to financial institutions…. Schumer's “preparation” probably kept the markets from overreacting when the announcement finally did come.

By: StockBoySF

StockBoySF — Sat, 12 Jul 2008 21:38:07 +0000

“The fact that they didn't suggests that either the assets have little (or unknown) worth or there is no bank that could afford to buy them. It is probably a combination of both.”

That's right.

There is very little (or no) market for those Alt-A / low doc mortgages… Banks/other financial institutions don't know how to value them…. particularly when housing prices (the houses being the collateral behind the loans which the banks are buying) continue to drop. And all banks of any size have some sort of exposure in one way or another to these Alt-A mortgages and they don't need any more headaches…. No bank wants to take on the risk associated with these investments which just keep getting worse and causing problems for more and more lenders…

By: mikkel

mikkel — Sat, 12 Jul 2008 20:32:33 +0000

Once again, if it was a classic bank run then a) the Fed would have backstopped them with liquidity and at the very least b) they would have been able to sell off everything to a different bank that would be hungrily waiting.

Neither of these happened…the $1.3 billion was just the straw that broke the camel's back. Indeed Indymac had started to do really fishy things to stay afloat and that's partially why Schumer called them out on it. He was angry that the regulators weren't clamping down on behavior that was just running up the bill.

By: runasim

runasim — Sat, 12 Jul 2008 20:28:50 +0000

Was Schumer's letter make public by Schumer? If so, i would question his judgment about timing and consequences, even though $1.3 billion is not what caused Indy's collapse. The failure was caused by industry wide risk unconscious mortgage lending practices.
Otherwise, this becomes a question of making it a crime to speak the truth.

Re: " Dodd/Rockefeller giving away national security secrets", it's too bad that this government is so secretive about its dubious practices that giving away some of their secrets is the only way to have the well-informed public necessary to keep a democracy functioning.

Some of us didn't bargain on having King George in the WH. We thought the Revolutionary War and the Constitution meant something.

By: jwest

jwest — Sat, 12 Jul 2008 20:02:28 +0000

It appears one of our favorite liberals had a big part in ruining this bank and the lives of the people that worked there.

From the LA Times:

IndyMac, which once employed 10,000, fell prey to a classic run on the bank, and regulators singled out Sen. Charles E. Schumer (D-N.Y.) as having helped to fuel massive withdrawals. On June 26, Schumer said in letters to the FDIC, the OTS and two other federal agencies that IndyMac might have "serious problems" with its loan holdings.

"I am concerned that IndyMac's financial deterioration poses significant risks to both taxpayers and borrowers," he wrote. The bank "could face a failure if prescriptive measures are not taken quickly."

That public warning prompted depositors to pull $1.3 billion out of accounts between June 27 and Thursday.

Between Schumer causing runs on banks and Dodd/Rockefeller giving away national security secrets, it’s a wonder we still have a country left.

By: mikkel

mikkel — Sat, 12 Jul 2008 19:40:12 +0000

The concern about Indymac isn't that they failed, it's that the FDIC didn't sell off the assets to another bank as of yet. The way the entire system is set up, they should be able to sell most of the accounts and assets at a discount to a bank that is in good shape. The fact that they didn't suggests that either the assets have little (or unknown) worth or there is no bank that could afford to buy them. It is probably a combination of both.

As more banks fail, if there are no groups that can buy their stuff then things are going to get really ugly.