IndyMac Investors Buy Bank for $13.9 BillionThe Federal Deposit Insurance Corp. (FDIC) announced on Friday it has made a deal to sell failed mortgage lender IndyMac to a group of private investors for $13.9 billion. It will cost the FDIC $8.5 billion to $9.4 billion in one of the most expensive bank collapses in history.
The Pasadena, CA-based bank will be controlled by IMB Management Holdings, which represents J.C. Flowers & Co. and Paulson & Co., a buyout firm and a hedge fund company, along with other investors. The sale will be completed by the end of the first quarter.
IndyMac had specialized in niche loans, including "Alt-A" loans made to prospective buyers that didn't verify income or assets. The bank was closed by the OTS in July after mortgage defaults shot up and nervous borrowers made a run on the bank.
The buyers will put $1.3 billion in capital into the bank, and the FDIC has agreed to share loan portfolio losses with IMB Management. IMB will take responsibility for the first 20 percent of the losses; the FDIC will cover a majority of any additional losses. To get the FDIC's loan loss protection, the buyers have agreed to go ahead with the streamlined loan modification program the FDIC started for IndyMac mortgage holders.
The new bank will have 33 branches with about 6.5 billion in deposits and $16 billion in loans. It will also service its $158 billion in mortgage loans and continue IndyMac's reverse mortgage business.
Of the 25 banks that failed in 2007 IndyMac was the only one that the FDIC could not sell right away. IndyMac was ranked as one of the largest banks to go under and among the costliest to the agency. Washington Mutual's failure with $307 billion in assets did not cost the FDIC anything. WaMu was bought in September by JPMorgan Chase for $1.9 billion.
Stock Market Heads Into 2009 With Optimism
Wall Street sets off into 2009 with a solid 3 percent gain from the first day of trading in the New Year. On Friday the Dow Jones industrial average rose 258 points, and the Nasdaq and Standard & Poor's 500 indexes were both up more than 3 percent.
But those gains may be hard to hold onto, as auto sales reports and unemployment figures hit the headlines, and a Congressional hearing on the SEC's role in the Bernard Madoff scandal that may cost investors of the hedge fund an estimated $50 billion. Investors will also react to the Obama stimulus plan he will unveil to congressional leaders today, along with nervously anticipating the economic data that will be released this week.
Obama says his stimulus plan will increase renewable energy production, and will cut taxes for middle-income families as well as launch a massive national rebuild of the country's infrastructure including highways and education.