IndyMac Federal Bank

IndyMac Federal Bank
Name	IndyMac Federal Bank
Type	Savings and loan association
Fate	Failed; placed into receivership
Founded	1985 (as Countrywide Mortgage Investment)
Defunct	2008 (FDIC receivership)
Location	Pasadena, California; Los Angeles County
Key people	Michael Perry; William Dallas; John Peterson
Industry	Finance; Mortgage banking

IndyMac Federal Bank was a Pasadena-based savings and loan association that became a high-profile casualty of the 2007–2008 financial crisis. Founded in the mid-1980s and once among the largest mortgage lenders in the United States, the institution's collapse intersected with the subprime mortgage boom, housing bubble, credit markets, and federal regulatory actions. The failure prompted litigation involving federal agencies, private investors, and major financial firms.

History

The institution traced its corporate lineage through a sequence of mergers, acquisitions, and rebrandings involving Countrywide Financial, American Savings and Loan Association, Financial Institutions Reform, Recovery, and Enforcement Act of 1989, Savings and loan crisis, Great Recession. Founders and executives moved among firms such as Countrywide Financial, GMAC Mortgage, and Fannie Mae while regional operations touched markets in California, Arizona, Florida, and Nevada. Notable corporate events included initial public offerings and capital raises amid the mortgage securitization boom led by Lehman Brothers, Bear Stearns, and Goldman Sachs. As housing prices peaked in metropolitan areas like Los Angeles, San Francisco, and Phoenix, Arizona, the lender expanded product lines and correspondent relationships with firms including Citigroup, Wells Fargo, and JPMorgan Chase.

Business operations and products

The bank specialized in wholesale and retail mortgage origination, servicing, and portfolio lending, offering adjustable-rate mortgages, interest-only loans, and Alt-A products similar to offerings from Countrywide Financial, IndyMac Bank, and Washington Mutual. Distribution channels included correspondent lending, wholesale brokers, and direct retail branches in regions such as Southern California, Las Vegas, and Miami. The firm funded loans through secured financing with counterparties like Federal Home Loan Bank, Goldman Sachs, and by issuing mortgage-backed securities to investors including Pension Benefit Guaranty Corporation-related funds, regional credit unions, and institutional buyers such as BlackRock and Vanguard. Risk management practices referenced models used by Moody's Investors Service, Standard & Poor's, and Fitch Ratings for tranche structuring in collateralized mortgage obligations.

Financial troubles and collapse

Rising delinquencies and falling home prices after peaks in 2005 and 2006 exposed concentrations in interest-only and option-ARM portfolios, echoing losses seen at New Century Financial, Countrywide Financial, and America's Wholesale Lender. The bank experienced funding stress similar to runs that afflicted Northern Rock and Bear Stearns as wholesale credit lines tightened with counterparties such as Goldman Sachs, Morgan Stanley, and Deutsche Bank. Regulatory scrutiny increased alongside investigations by Office of Thrift Supervision and posting of loss reserves that mirrored scenarios involving Fannie Mae and Freddie Mac. In 2008, depositor withdrawals accelerated, reminiscent of the crises at Washington Mutual and insolvencies during the 2008 financial crisis.

Government intervention and receivership

In July 2008 federal regulators placed the institution into receivership, transferring assets and deposits to the Federal Deposit Insurance Corporation through a resolution that shared characteristics with actions taken in the Savings and Loan Crisis and interventions involving Fannie Mae and Freddie Mac. The FDIC established a bridge bank to assume insured deposits, engaging with potential acquirers including OneWest Bank and consortia led by Citigroup and Wells Fargo. Congressional hearings in committees like the United States House Committee on Financial Services and the United States Senate Committee on Banking, Housing, and Urban Affairs examined the collapse alongside testimony referencing Henry Paulson, Ben Bernanke, and the Troubled Asset Relief Program. The receivership process involved asset disposition strategies used by the Resolution Trust Corporation during prior thrift failures.

Legal actions and settlements

Post-collapse litigation involved the FDIC suing former executives, directors, and underwriters in cases comparable to suits against Lehman Brothers principals and AIG counterparties. Lawsuits named investment banks including Goldman Sachs, Morgan Stanley, and Deutsche Bank over securities offerings and disclosure claims, echoing litigation trends seen after the Subprime mortgage crisis. Settlements and judgments referenced precedents from cases against Countrywide Financial and Indymac Bank (former) counterparties, while parallel enforcement actions addressed alleged violations involving Securities and Exchange Commission rules and state attorneys general such as those from California and New York. Trustee and bondholder suits invoked statutes administered by agencies like the Office of the Comptroller of the Currency and cited rulings from courts including the United States Court of Appeals for the Ninth Circuit.

Aftermath and legacy

The failure influenced policy debates over regulatory consolidation exemplified by the later creation of the Consumer Financial Protection Bureau and reforms in banking supervision discussed in legislation like the Dodd–Frank Wall Street Reform and Consumer Protection Act. The case informed risk management reforms promoted by Basel Committee on Banking Supervision guidance and prompted changes to mortgage underwriting standards used by Fannie Mae and Freddie Mac. Academic and industry analyses compared the episode to crises involving Northern Rock, Washington Mutual, and Lehman Brothers, contributing to literature from think tanks such as the Brookings Institution, American Enterprise Institute, and the Urban Institute. The institutional lessons affected successor entities, servicers, and purchasers including OneWest Bank, Pacific Western Bank, and various private equity investors.

Category:Defunct banks of the United States Category:2008 in finance Category:Savings and loan crisis