IndyMac said this week it was unable to raise new capital, would slash staff by 60 percent, and had stopped making most home loans. Its shares have sunk to 38 cents, with one analyst forecasting they will be worthless.(Reuters)
The Reuters piece goes on to point out that the FDIC has a few options including having other banks step in to take on the healthy assets. So we can be relieved that the FDIC's $53 billion in funds won't be reduced by Indy's $17 billion in deposits.
This makes for an interesting "It's a Wondeful Life" moment. If you have your money in one of Indy's bank units, will you begin to withdraw like those ingrates at Bailey Savings and Loan? Or will you stay the course? Or as George Bailey said, "Can't you see people, Jamie Dimon is buying! Not selling!"
If the depositor looks at the matter with rational distance he is well aware that his first $100,000 is covered, but given all that is going on in the world simultaneously, is regular Joe or Jane that emotionally detached from their green babies? Or is that Schwab or Vanguard account looking like a safer haven? Do you have trust that a Bear, Sheila Bair, head of the FDIC, will be there to see you through when some other mega firm happens to simultaneously go under before Indy is unwound? Or are you allocating a special $38 dollars to pick up 100 shares to ride the wave and buy like a junior Mr. Potter.
My advice...buy 100 shares and move your savings for peace of mind. And what will Indy be doing while we watch them go through the shivers? Their letter to investors sounds reassuring enough if we ignore probably 80% of it and focus on the the rainbow:
Thus, our core business model will include (1) Financial Freedom, one of the largest reverse mortgage lenders in the Country; (2) a top ten mortgage loan servicing operation, with a solid retention production unit; and (3) a Southern California retail bank branch network, including 33 branches and roughly $18 billion in deposits, of which over 96% is fully covered by FDIC insurance. In addition, when this housing and mortgage crisis abates and we return to health, we would also hope to be an investor in mortgage loans and mortgage-backed securities and might re-enter the national forward mortgage production business with a low-cost, non-commissioned-based business model.
Yep. Once the clouds are past they hope to re-enter all the businesses that they handled so badly the first time around. Having suffered so greatly, I am sure they will be wiser then than now, assuming they live that long.
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