IndyMac Echoes From The Grave
December 26, 2008 – 5:42 pmIndyMac is poised to strike from the grave for billions of taxpayer dollars. Even as it is revealed that the bank’s former regulator allowed the bank to backdate a capital infusion by two months, the FDIC is poised to sell the bank to an incestuous brew of ex-Goldman Sachs executives now in charge of a private equity company and ex-Goldman Sachs executives currently in charge of TARP.
IndyMac Bank’s regulator should be investigated by Congress for letting the failed mortgage lender backdate a capital infusion two months before it collapsed, U.S. Representative Spencer Bachus said. The House Financial Services Committee should review the Office of Thrift Supervision’s decision allowing IndyMac to record a May 9 infusion of $18 million as first-quarter capital, Bachus, the panel’s ranking Republican, wrote in an e-mail statement this week. The move helped Pasadena, California-based IndyMac reach “well capitalized” status and escape regulatory restrictions, Treasury Department Inspector General Eric Thorson wrote in a Dec. 22 letter to U.S. Senator Charles Grassley, an Iowa Republican.
Such mismanagement is becoming commonplace among regulatory agencies these days, but this one was no small matter.
The backdating let IndyMac restore its risk-based capital ratio to the 10 percent “well-capitalized” minimum threshold in the first quarter. It also enabled the lender to avoid complying with a law that requires banks to get a Federal Deposit Insurance Corp. waiver to accept brokered deposits, Thorson wrote.
But swarms of overdue mortgages eventually caused a run on IndyMac, forcing regulators move in and seize the bank in July. It was a short time ago, but at the time, the $18B seizure was the second-largest in US history.
Then, bubbling like lava to the surface, the FDIC began rumbling about seeking a buyer for this rotting corpse.
IndyMac Bank, the California mortgage lender seized by U.S. regulators five months ago, will be sold by the Federal Deposit Insurance Corp. before the end of this year, said a person familiar with the matter.The bank may be sold intact or split among multiple buyers, according to the person, who declined to be named because discussions aren’t public. Bids were due by Dec. 15. FDIC spokesman David Barr said today an announcement about IndyMac will be made by year-end. He declined to comment on a sale.
Intact or in pieces, dead or alive, “just get this carcass out of here” is the message Sheila Blair is sending. So, who is listening? PNC Financial Services Group and U.S. Bancorp were earlier on, but who wins out? According to ml-implode.com, it’s a pair of former Goldman Sachs executives.
The FDIC’s most expensive bank failure, IndyMac, is slated to land in the hands of a private equity firm.
The winner is New York–based Dune Capital Management, founded by two ex-Goldman partners. Dune’s Co-CEO Dan Niedich was known as the “dean” at Goldman of investing the firm’s capital in real estate. Chairman and Co-CEO Steve Munchin comes from a family of Goldman bankers. The firm was seeded in 2004 by legendary hedge fund trader George Soros.
A sale price for the transaction could not be determined.
With Goldman Sachs involved, you can bet a lot more than just the sale price will be murky in this deal. The sale price should be public because the proceeds will be used to replenish the FDIC according to Sheila Blair. But don’t expect any more transparency regarding the sale of IndyMac to Dune Capital than you would expect regarding TARP distributions to banks. Why? Because Dune’s financing for the deal will be provided by Oaktree Capital Management. Who are they? Witness:
Oaktree, a well-known investor in distressed assets, had been among the firms that looked over IndyMac’s books in spring, when the bank was desperately seeking a cash infusion. IndyMac was seized by the government in July.
Now watch how nicely things just fall into place. Financing provided by Oaktree Capital Management, a well-known vulture capitalist firm. Makes you wonder if Dune Capital Management is in distress, and if so, why it’s buying the decrepit remains of IndyMac? All the better to use to go after the TARP funds? Well, if you want a handout, you better have something to hand back.
This scam is simple and you can see it coming for miles: Indie Mac gets bought off for the FDIC, Goldman Sachs alums get bankrolled for billions under TARP, and the taxpayers get shafted again under more piles of mounting debt.
You will know this is more than speculation as soon as Dune Capital gets its first infusion under TARP. You will probably know when, but you may never know how much.
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