IndyMac Bank

IndyMac Bank. It was a prominent American savings and loan association headquartered in Pasadena, California, that became one of the largest mortgage lenders in the United States during the housing bubble of the early 2000s. Founded in 1985 as a mortgage real estate investment trust by David S. Loeb and Angelo Mozilo, it was spun off from its parent, Countrywide Financial, in 1997. The bank's rapid growth was fueled by aggressive underwriting of Alt-A and other non-traditional mortgage loans, making it a symbol of the risky lending practices that precipitated the subprime mortgage crisis.

History

The institution was established in 1985 as Countrywide Mortgage Investment, formed by David S. Loeb and Angelo Mozilo of Countrywide Financial. It converted to a savings and loan association in 2000 and was renamed, moving its headquarters to a distinctive building in Pasadena, California. Under the leadership of Michael W. Perry, who became CEO in 2006, the bank pursued an aggressive strategy focused on the Alt-A mortgage market, which involved loans often requiring limited documentation of a borrower's income. This period coincided with the peak of the United States housing bubble, during which the bank became a top-10 mortgage originator nationally, utilizing mortgage-backed securities and warehouse lending lines to fund its operations. Its expansion was marked by significant advertising campaigns and a reliance on brokered deposits to fuel growth, drawing scrutiny from the Office of Thrift Supervision.

Collapse and seizure

The collapse was triggered by the escalating subprime mortgage crisis and a rapid erosion of confidence. In June 2008, Charles Schumer, a U.S. Senator from New York, publicly released letters questioning the bank's solvency to the Federal Deposit Insurance Corporation and the Office of Thrift Supervision, which prompted a bank run where depositors withdrew over $1.3 billion in 11 days. As home prices fell and delinquency rates soared on its loan portfolio, the bank's capital position deteriorated critically. On July 11, 2008, the Office of Thrift Supervision closed the institution and appointed the Federal Deposit Insurance Corporation as receiver, in what was then the third-largest bank failure in American history. The seizure occurred during a period of immense stress for the broader financial system, shortly before the failures of Lehman Brothers and the rescue of AIG.

Aftermath and legacy

In the immediate aftermath, the Federal Deposit Insurance Corporation established IndyMac Federal Bank, FSB as a bridge bank to manage depositor assets and eventually sold the remnants to a consortium including Dune Capital Management, J.C. Flowers & Co., and Paulson & Co. in 2009, which renamed the entity OneWest Bank. The failure, which cost the Deposit Insurance Fund an estimated $10.7 billion, became a pivotal case study in the Financial crisis of 2007–2008 and led to increased congressional scrutiny of regulators like the Office of Thrift Supervision, which was later abolished by the Dodd–Frank Wall Street Reform and Consumer Protection Act. The event highlighted the dangers of brokered deposits, concentrated exposure to Alt-A loans, and liquidity risk, influencing subsequent reforms in bank regulation and consumer protection. Former CEO Michael W. Perry was later sued by the Securities and Exchange Commission for fraud, a case that was settled in 2016.

See also

* Washington Mutual * Countrywide Financial * Subprime mortgage crisis * Office of Thrift Supervision * Federal Deposit Insurance Corporation

Category:Banks established in 1985 Category:Banks disestablished in 2008 Category:Companies based in Pasadena, California Category:Financial crises