Did IndyMac’s regulator let it backdate capital?

December 23rd, 2008, 4:27 pm · 13 Comments · posted by Mathew Padilla

This one is all over the Web: The Office of Thrift Supervision allowed IndyMac Bank in Pasadena to backdate a capital infusion so it would avoid scrutiny by rival regulator the FDIC, says the Treasury Department’s independent investigator. Two months later Indymac failed. The New York Times has a good story on it HERE.

John Reich, OTS director, said the $18 million capital infusion was “a relatively small factor” in the collapse of IndyMac, according to the Times. However, Reich removed Darrel Dochow, who allegedly approved the backdating, from his job as the agency’s western director pending the results of a separate inquiry. The Times has some interesting background on Dochow.

Perhaps this revelation undermines Rush Limbaugh’s theory that Sen. Chuck Schumer (D-NY) deliberately started the run on IndyMac to create a financial panic, which would help the Democrats in November. It appears there was a serious capital shortfall at IndyMac, which should have been brought to the FDIC’s attention, long before Schumer spoke up.

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T.O. Jason says:

December 23, 2008 at 5:06 pm

Limbaugh doesn’t have any theories, just OxyContin-induced paranoid delusions.

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oc1958 says:

December 23, 2008 at 5:55 pm

Limbaugh has less effect than five scotches neat.Merry Christmas.Dear Lord please let me spell this right.

Republicans are TRAITORS says:

December 23, 2008 at 7:49 pm

The Country needs a special prosecutor to take up the fraud on Wall Street. It is time SEC Chairman Chris Cox gets investigated. I demand these criminals go to prison.

December 23, 2008 at 7:51 pm

Another crime being committed by FDIC Chairwoman Sheila Bair is that none of the big banks are ever put on the troubled bank list. Not Indymac, not WAMU, not Citi, none of them. The system is corrupt and broken.

Myrtle Beach says:

December 23, 2008 at 8:12 pm

it would probably be scary to know everything that has slipped through the cracks at some of these places

DemocratsAreCriminals says:

December 23, 2008 at 11:00 pm

“Perhaps this revelation undermines Rush Limbaugh’s theory that Sen. Chuck Schumer (D-NY) deliberately started the run on IndyMac to create a financial panic..”

This doesn’t change anything. We know what Schumer said and when he said it. If IndyMac had any chance of saving themselves Schumer made sure that they were done for.

Schumer is either a fool or a criminal or both.

Padilla, what’s your deal? Why are you trying to protect this creep?

CoverUpForSchumer says:

December 23, 2008 at 11:11 pm

“Perhaps this revelation undermines Rush Limbaugh’s theory that Sen. Chuck Schumer (D-NY) deliberately started the run on IndyMac to create a financial panic”

REALLY? And I suppose the run on IndyMac Bank IMMEDIATELY following Schumer’s public comments had nothing to do with IMB’s demise.

Mathew Padilla, Reporter says:

December 23, 2008 at 11:19 pm

Schumer did the right thing. He told the truth and exposed government’s failure to act.

IndyMac’s capital was inadequate, it was overwhelmed with so many of its stated-income loans going delinquent, and it could not sell new loans or ones in its pipeline with investors shunning mortgage-backed securities not issued by GSEs. There was no hope for IndyMac.

If the allegations about the OTS are true, than the OTS helped IndyMac hide its weak capital position from the FDIC. If the FDIC had known sooner, perhaps it could have found a buyer for IndyMac’s deposits in time. But even that is a big if. IndyMac’s deposits were not as valuable as a lender like Washington Mutual, which has solid customer relationships via long service of checking accounts, saving accounts etc.

In fact, IndyMac was digging a bigger hole for itself, and the government, when Schumer exposed it and its use of brokered deposits. Brokered deposits carry the highest rates in the market and have the least customer loyalty, another reason IndyMac’s deposits are not valued.

Why do you think the FDIC still hasn’t found a buyer for IndyMac?

-Matt, Blogger

dodgerfan says:

December 23, 2008 at 11:26 pm

Not buying it Matt. Limbaugh was only one of a slew of pundits who correctly attributed IndyMac’s demise to Schumer’s indiscreet words.

http://www.cnn.com/2008/POLITICS/07/13/indymac.schumer/index.html

“‘The OTS pointed the finger directly at Schumer for the failure, accusing him of sparking a bank run by releasing a letter that “expressed concerns about IndyMac’s viability.’”

He even caused a ban run!!

“‘In the following 11 business days, depositors withdrew more than $1.3 billion from their accounts,’ the OTS said in a statement announcing the California-based lender’s takeover on Friday.”

Former IMBer says:

December 23, 2008 at 11:51 pm

I thought it was awesome how Mike Perry would send company-wide e-mails stating that we were well-capitalized and that there was nothing to worry about in early 2008.

Perry, you’re the best CEO EVER!!

December 24, 2008 at 12:10 am

Bingo, Matt.

December 24, 2008 at 7:50 am

To Dodgerfan,

First, the OTS blamed Schumer for the run on IndyMac, but it now looks like we can’t trust the OTS on IndyMac.

Second, the bank run actually SAVED the FDIC money in the long run, because it forced them to seize IndyMac before it took on even more expensive brokered deposits.

December 24, 2008 at 8:36 pm

No Matt:

The problem is not WHAT Schumer said. No one disagrees with WHAT he said. The problem is that he said what he said publicly.

Why do you think the FDIC keeps its list of troubled banks secret? It’s giving these banks a chance to fix its balance sheets. Schumer just shot off his mouth and killed any chance of IMB fixing the problem.

SCHUMER SHOULD BE THROWN IN PRISON!!!

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