The Fall of IndyMac Bancorp Inc.

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Case Details:

Case Code : FINC064
Case Length : 20 Pages
Period : 2000-2009
Pub. Date : 2010
Teaching Note :Not Available
Organization : IndyMac Bancorp Inc
Industry : Banking
Countries : US

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This case study was compiled from published sources, and is intended to be used as a basis for class discussion. It is not intended to illustrate either effective or ineffective handling of a management situation. Nor is it a primary information source.

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“IndyMac was a high-flying mortgage lender specializing in exotic and risky loans sometimes called Alt-A loans. For some of those loans, IndyMac didn't require borrowers to provide documentation of income. It worked great during the housing boom. They made hundreds of millions of dollars in profits for a couple of years. But when home prices started falling and loans began to go sour, they fell very hard.” ¹

- John Ydstie, Economics Correspondent, National Public Radio², in July 2008.

“The pure underlying factor that made the house fall down was that it was predicated on the view that home prices would continue to rise perpetually. When that didn't work out was when the cracks started to emerge.”³

- Jason Arnold, Analyst, RBC Capital Markets Corporation⁴, in September 2008.

Introduction

On July 11, 2008, the US Federal Deposit Insurance Company (FDIC)⁵ took control of the operations of the California-based bank, IndyMac Bancorp Inc. (IMB), as FDIC had lost confidence in the IMB's ability to meet the redemption demands of its depositors.

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1] Mandalit Del Barco, “Nervous IndyMac Customers Seek to Pull Funds,” www.npr.org, July 14, 2008.
2] Founded in 1970, NPR is a US-based public radio network. It is a privately and publicly funded non-profit membership media organization that serves as a national syndicator for over 790 radio stations in the US.
3] Richard Clough, “IndyMac Last Gasps: Aggressive CEO Michael Perry Led Pasadena Thrift to Peaks of Growth -And Then to Ruin,” Los Angeles Business Journal, September 15, 2008.
4] Founded in 1864 in Toronto, Canada, RBC Capital Markets Corporation is the corporate and investment banking division of Royal Bank of Canada.
5] The Federal Deposit Insurance Company is an independent agency created by the US Congress in 1933 to preserve public confidence in the US banking system. According to the regulations as of January 2010, FDIC guaranteed payments of up to US$ 250,000 per depositor in any FDIC insured bank. The US$ 250,000 limit would remain till December 31, 2013.

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