Saturday, August 9, 2008

Today's Keating Five

"Questions I can't get off my mind: Why wasn't IndyMac Bank, whose problems were well known in the financial community, not on the [FDIC's] list of troubled institutions until shortly before its failure this month? ... Each quarter, the FDIC discloses how many banks and thrifts are on its problem list. It does not name which institutions make the list because if if did, depositors would yank out their money and they would almost surely fail. ... IndyMac, ... was obviously not on the list, a fact confirmed by the FDIC after its failure. The FDIC says it was added in June. ... 'IndyMac started going to hell in the second half of last year,' when it lost its ability to sell mortgages it made to investors, says bank consultant Bert Ely. Highline Financial is one of several companies that rate the safety of banks and thrifts. Its scale ranges from 99 (best) to zero (worst). Its IndyMac rating fell from 55 at the end of 2006 to 1 at the end of last year. In March, it was rated zero. ... Christopher Whalen, managing director of Institutional Risk Analytics, says 'everyone expects regulators to be ahead of the curve, but they never are. It's hard for regulators to be proactive. If the FDIC was beating the hell out of IndyMac a year ago, the congressmen that represent IndyMac would have been all over them'," my emphasis, Kathleen Pender at, 24 July 2008.

I never expect "regulators to be ahead of the curve". I expect they hire weathermen to "see which way the wind blows". Note: IndyMac is its own congressional district! Silly me. I thought congressional districts were apportioned on the basis of population, not whether or not a locale contains a large bank headquarters. I also thought congressmen represented people. Does this mean say, 399 Park Avenue has 66 congressional districts within it? After all "C" has total assets of $2,100 billion and Indy Mac had $32 billion; $2,100 / $32 = 66. Why ask? Of course!

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