Word: indymac
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Furthermore, the Federal Government's big loan-modification effort - abbreviated as HAMP - does little to help such borrowers since in many cases lenders will recoup more by foreclosing (the test any loan modification must pass). A recent Bank of America Merrill Lynch study of loan modifications at IndyMac, which provided the template for broader modification efforts, found that about 20% of subprime loans had been rewritten, while fewer than 8% of option ARMs got reloaded. (See pictures of TIME's Wall Street covers...
Delays are happening in part because a recession is not a great time to buy a bank, and the FDIC is having trouble finding acquirers for troubled institutions. The FDIC could liquidate a failed bank or run it itself, as it did late last year with IndyMac. But those options tend to be even costlier. Meanwhile, "bad banks are more like fish than wine," says Bert Ely, a bank-industry consultant and an FDIC critic. "They get smellier with...
...aging infrastructure while Washington was dragging its feet; its politicians adopted first-in-the-nation greenhouse-gas regulations, green building codes and efficiency standards for automobiles and appliances that have rearranged the national energy debate. Yes, it was also an early adopter of subprime mortgages - Countrywide, Golden West and IndyMac were all California-based - but life on the frontier has always been risky. "This is the most dynamic place for change on earth," genomic pioneer J. Craig Venter said on a recent tour of his San Diego labs, where researchers are studying ways to convert algae into oil, coal into...
...speed bumps were already starting to pop up. Building a bank was old hat to LaRoe. The one he founded in 1999, he sold to a larger company in 2006, quadrupling investors' money. This time around, he lined up $24 million in commitments in three months. Then came IndyMac. On July 11, the FDIC moved to take over the nation's seventh largest savings and loan, a casualty of aggressive home lending and one of the biggest bank failures in U.S. history. Images of depositors lining up to pull their money out of the bank flooded the media...
...IndyMac was a one-trick pony," says Bert Ely, a banking consultant. "Citigroup has a whole stable of horses you have to deal with." Nonetheless, IndyMac does provide an example in which nationalization worked, suggesting that at least some of the fears critics have of nationalization may be unfounded...