Call it the Indymac massacre. It’s the second largest bank failure in US history. Many of the unfortunate souls who put their hard-earned dough in Indymac’s high-paying cds have been lining up in the hot sun to get their money out over the past two days. We all know the US government insures deposits up to $100,000. But apparently 10,000 folks chose to keep even more than that with them.
It’s interesting to note that Indymac was once a part of now defunct Countrywide. The firm was once called Countrywide Mortgage Investments. It was created as a place to hold the jumbo mortgages that even Countrywide—more conservative at the time—didn’t want to trade in. Countrywide co-founder Angelo Mozilo served at the top of Indymac for years, as did his brother Ralph. The company was spun off officially in 1997.
Eventually Indymac grew completely independent. It acquired a bank charter, used the Internet aggressively, both to gather deposits and make loans. Its specialty was Alt-A loans, those in which the borrower didn’t have to provide the usual documentation.
At their peak a year or so ago, Indymac shares hit $50. Today they’re worthless. At least Countrywide shareholders got a few dollars in Bank of America stock. And they now have one less competitor to worry about! Of course the biggest loser is us taxpayers who may be on the hook for as much as $8 billion.
BusinessWeek editors Chris Palmeri, Prashant Gopal and Peter Coy chronicle the highs and lows of the housing and mortgage markets on their Hot Property blog. In print and online, the Hot Property team first wrote about the potential downside of lenders pushing riskier, "option ARM" mortgages and the rise in mortgage fraud back in 2005—well ahead of many other media outlets. In 2008, Hot Property bloggers finished #1 in a ranking of the world's top 100 "most powerful property people" by the British real estate website Global edge. Hot Property was named among the 25 most influential real estate blogs of 2007 by Inman News.