The big news for the week came late on Friday.
After market close, it was announced, that IndyMac Bank, a leader in “Alt-A” loans, had been seized by the Office of Thrift Supervision, due to a run on deposits. This made IndyMac Bank the 2nd largest federally insured financial institution to be seized by US regulators. The largest failure, if you are curious, was in 1984, Chicago’s Continental Illinois Bank and Trust. A successor institution, IndyMac Federal Bank FSB, will open next week.
About now I’m remembering two years ago, when many prominent individuals were talking about how the subprime situation was under control said it would produce minimal fallout. What caused all this was the huge number of defaults on mortgage loans made to, well, people who could not afford them. More troubling is the fact that there has clearly been little to no oversight of these institutions.
The why is easy, everybody seemed to be making money, investors were making money and more people were given the ability to buy property, so it seemed like a win win for all.
Problem is that if it seems too good to be true, it probably is. Some blame US Senator Shumer from New York, for creating this mess. Last month he blamed their lax lending rules for putting the institution on the brink of collaspe. He may have accelerated it, but let's be clear, IndyMac is to blame. Instead of using common sense they allowed greed to drive their internal policies. Now they and many shareholders and depositors are paying for their greed, not to mention the people who should not have been sold those mortgages in the first place.
IndyMac managed to acrue $900 million in losses. So now depositors are left with the grim reality that only $100,000 on deposit with Indy Mac Bank will be insured. What’s even more troubling about all this is that the FDIC has 90 institutions on it’s troubled bank list and Indy Mac Bank was not one of them. So this begs the question of how many more might fail.
Other news....can be found at the Burbank Real Estate Report!
To blame Senator Schumer for creating this mess, is like shooting the messenger, rather than the message. If anything comes out of all this, I hope it is the importance for oversight in the lending business. We need to get the foxes out of the hen house.
Greed is such an UGLY thing!
I agree! Thanks for stopping by Myrl!