IndyMac Bancorp Inc. became the second-biggest federally insured financial company to fail today after a run by depositors left the California mortgage lender short on cash.Liar Loans At Heart Of The Matter
The Pasadena, California-based bank specialized in so-called Alt-A mortgages, which didn't require borrowers to provide documentation on their incomes. Its home state has been among the hardest hit by foreclosures.
"Given their focus on Alt-A and a heavy concentration in California, they would have suffered meaningful losses in almost any scenario," Brian Horey, president of Aurelian Management LLC in New York, said before the seizure was announced. Aurelian is short-selling IndyMac shares to gain from declines.
IndyMac becomes the largest OTS-regulated savings and loan to fail and second-biggest financial institution to close behind Continental Illinois in 1984, according to the FDIC.
Anyone over the FDIC limit at IndyMac can kiss it goodbye. There has been ample warning. Alt-A loans (AKA Liar Loans) and ridiculous lending policies did this company in.
Wachovia (WB) and Washington Mutual (WM) are both heavily at risk over Alt-A . It is debatable either survives. I talked about Alt-A loans recently in Fannie and Freddie Waterfalls Are Too Big to Bail. Inquiring minds will want to take a look.
We are very close to the point where any bank can fail at any time. If you are over the FDIC limit at Wachovia or Washington Mutual (or for that matter anywhere), do something about it immediately if not sooner.
Mike "Mish" Shedlock
http://globaleconomicanalysis.blogspot.com
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