The "unemployment" report was bad - the jobless rate rose 0.2% to 5.7%. Job losses were, however, smaller than the median estimate. The pace of decline in the workweek and aggregate hours suggest that firms have, for now, started to run out of fat to cut. The payroll and household tallies, and ADP, all seem to agree, which makes me think layoffs really have slowed. However, labor hoarding may not persist if orders remain weak.
The participation rate has more or less stabilized in recent months, which is part of the reason the jobless rate is rising so fast. My guess is that households, faced with a rapid rise in the cost of living and a decline in wealth and access to credit, don't feel they can afford to get frustrated by a weak labor market. They have to keep looking. That should keep wages down.
Does the holding company own anything other than the bank? Is the bkrupcy to protect the (former?) fat cats? I don't do bankrupcy and I'd like to know.
No, not helpful reporting.
As you point out, the holding company is not the bank; and it is not entirely clear what, if anything, the holding company owned aside from the bank.
Banking law is sort of a separate animal ... when it runs up against bankruptcy, there is fruitful ground for legal discussion. Maybe we'll get more information as the process grinds on.
As you point out, the holding company is not the bank; and it is not entirely clear what, if anything, the holding company owned aside from the bank.
Bloomberg says the holding company has $50-$100 million in assets. I think we are supposed to believe that this is what it owns other than the bank.
My biggest concern, frankly, is whether this increases the cost to the FDIC or not. That is, whether the BK of the holding company will make it more difficult for the FDIC to find a buyer for the bank (if that is even plausible any longer outside the holding company's BK).
I don't know the answer to that, and Bloomberg's not tellin' if it knows . . .
Are you still an egomaniac if the company truly does revolve around you?
I'm willing to bet that having to answer all the phones, clear all the paper jams in the printer and make all the coffee has probably done a number on the egomania thing.
Obviously, there was no choice other than BK. A CEO without a cadre of flaks and assistants is just too lonely a CEO . . .
I'm sure he has several temps to do the menial jobs for him. I just love how he went for a "haircut" on the thursday afternoon prior to seizure-much irony in that situation IMO
FDIC never takes receivership of bank holding companies. Only the bank or banks are involved. This is not a well known fact with bank closing procedures. It does some times cause problems for the FDIC especially when bank records are held at the holding company level rather than in the bank's archives. There are several other unique issues FDIC must face regarding bank holding companies when it does not have access to the holding company records especially when fraud is involved as it often is.
Liz,
A parent company is usually not liable for debts of a subsidiary unless the parent guaranteed obligations of the sub. They hold the stock and that is the extent of their risk (entities this large are not susceptible to undercapitalization rules).
These relationships are frequently for tax purposes or to facilitate purchase transactions (same shareholders in a purchase or sale). If purchases and sales are easier, that tends to make the stock more valuable (liquidity principle).
Holland is only a part of The Netherlands, which is the official country. Holland is an old regional name that people use colloquially to mean the whole - sorta like if people used New England to refer to the US.
And no doubt all sorts of lawyers and economic types are smiling to themselves about how clever they've been in drawing these fine and irrefutable distinctions. I furthermore bet that the paper cups are accumulating the the printer is still jammed. But I'm the grumpy sort.
Bank holding companies have also been known to later purchase the assets of its own failed bank from either FDIC or RTC. First City National Bank Houston's holding company (First City Bancorporation)with very nice political connections on a state and national level comes to mind. Chutzpah! Holding companies are notorious for sucking all of the bank's profits upstream and into the holding company before its bank fails. This will be a part of the FDIC's investigation. However, the FDIC does NOT conduct massive investigations of these failed banks unless it thinks it will be cost effective to sue the directors and recover funds larger than the cost of litigation. All failed banks pass a cost test before authority to sue the directors is approved in DC. If a failed bank fails the cost test for future litigation then the investigation is closed out and the rotten bankers are off the hook because their pockets and insurance (if any) are not worth FDIC's time and trouble to pursue. Been there, done that, got the t-shirt.
If you are interested in legally important distinctions (as I am), you should read the court filings and not rely on press reports (Bloomberg or otherwise).
I'm willing to bet that having to answer all the phones, clear all the paper jams in the printer and make all the coffee has probably done a number on the egomania thing.
actually, i believe Perry was evicted from indymac's offices by the FDIC, which would be why he doesn't have access to indymac bancorp's books and records. it's more likely that his new office in the garage beside the kitty litter is what did a number on the egomania thing.
The FDIC ``has been in sole possession custody and control of all of the books and records of'' IndyMac Bancorp and the court filing was made without access to information that bankruptcy laws typically require, Chief Executive Officer Michael W. Perry said in court papers.
I couldn't have put that program together without CR and Tanta and all the amazing commenters. And now I'm coming back to the well again. I'm thinking about trying to do a story about what happens when the FDIC has to take over a bank. Would anyone with knowledge on this matter like to talk with me? My e-mail is alex@thislife.org.
I took out a $100K IndyMac CD in January that matured one week after the FDIC took over. I am still waiting to hear when I will be paid by the FDIC. The good news is that the interest was paid monthly, but the last payment was 07/01/2008.
Bummer that I barely missed getting out of this on time.
I also bought a NJ Bond a week before the ARS market imploded, and I bought ELN yesterday.
You wouldn't expect a brilliant, qualified reporter to distinguish between a bank and a bank holding company, would you? So silly to split hairs that way.
Wow effen...them's some bad lucks; I hop the pendulum swings the otherway for you soon...but in the mean time, why don't you let the board know your next move so we can...ahhh...erm...act accordingly.
Too bad about that brain-disease-causing-company...I think they have a pump-monkey on this board somewhere, too.
"IndyMac was seized by U.S. regulators on July 11 after a five year run of fraud left the mortgage lender strapped for cash."
--FIXED
What's the difference between The Netherlands and Holland?
Netherlands is always the whole country. "Holland" is technically the two provinces of North and South Holland where the most concentrated population centers are. This does not stop the Dutch from chanting "hup hup Holland" to cheer on their national soccer/voetbal team, so the terms are somewhat interchangeable, but "Holland" can be taken as an elitist snub in the case where "Netherlands" would be more accurate. If you want to be safer in referring to the west-coast population center, "Randstad" is a better term.
Not to justify a clear error, but isn't this slip just an implicit recognition that the technical separation of banks from their holding companies, insisted upon for a variety of once-deemed-important reasons, has become a legal fig-leaf with little remaining utility? The mere fact that the HC was sitting on $100M in assets while its bank sank seems like a lot of cash skimming from a failing business.
Indymac didn't own any real estate to speak of. Give mgt a tiny piece of credit for seeing the bubble in CRE and selling what little RE they owned.
The Holding Company BK is meaningless. The creditors are the professional service firms who haven't been paid in full: E&Y, Alston, JPMC.
I'm not a lawyer, but I thought the most interesting sentence is that Perry is the sole employee. That means that at some point this month all the other executive officers (who were officers of both the HC and the Bank) quit the HC... and not a moment too soon since after the takeover there was a ginormous conflict of interest b/t the two entities. I wonder if those idiot officers figured out in time that they had to resign from the HC before doing anything at the Bank that might have hurt the value of the HC. If not, say Hello to Lawsuits guys and gals.
interesting quirk of federal banking law (and I don't know if this is still true, or not)--the shareholders of a failed federal institution used to be personally liable for an amount equal to the par value of the shares they owned. If the only shareholder is a bank holding company, the bankholding company, but not its shareholders, would have the liability.
I'm beginning to wonder if re-introducing in a meaningful way (the old law was ludicrously easy to evade), the idea of personal liability for the owners and managers of regulated financial institutions might not be a good idea. Forget clawing back restricted stock bonuses of the corporate architects of disaster, take them for all they are worth. And if you own stock in a brokerage house, you're personally on the hook for its debts.
Call if the Lloyd's of London approach. Every syndicate membership comes with a cartridge for the Purdy's, in case that's necessary, Brigadier. Of course, critics of my idea might note that Lloyd's in the days of unlimited personal liability was not exactly a paragon of disciplined risk management. Oh well, the road to Hell . . .
The mere fact that the HC was sitting on $100M in assets while its bank sank seems like a lot of cash skimming from a failing business.
You can't be serious. You've no idea why there was $100MM at the HC. Could have been a requirement for financing they were getting. Could have been funds from Perpetual Preferred that hadn't yet been paid down to the Bank. Point is, you have no idea and there's certainly nothing wrong with this on it's face.
On First?
i guess the unemploymnet report was good
it's friday. Which bank is going to be next?
p.s. unemployment is at 5.7%
The "unemployment" report was bad - the jobless rate rose 0.2% to 5.7%. Job losses were, however, smaller than the median estimate. The pace of decline in the workweek and aggregate hours suggest that firms have, for now, started to run out of fat to cut. The payroll and household tallies, and ADP, all seem to agree, which makes me think layoffs really have slowed. However, labor hoarding may not persist if orders remain weak.
The participation rate has more or less stabilized in recent months, which is part of the reason the jobless rate is rising so fast. My guess is that households, faced with a rapid rise in the cost of living and a decline in wealth and access to credit, don't feel they can afford to get frustrated by a weak labor market. They have to keep looking. That should keep wages down.
Does the holding company own anything other than the bank? Is the bkrupcy to protect the (former?) fat cats? I don't do bankrupcy and I'd like to know.
No, not helpful reporting.
As you point out, the holding company is not the bank; and it is not entirely clear what, if anything, the holding company owned aside from the bank.
Banking law is sort of a separate animal ... when it runs up against bankruptcy, there is fruitful ground for legal discussion. Maybe we'll get more information as the process grinds on.
We cannot and will not allow a wage-price spiral to develop.
[emphasis added]
Janet Yellen, SF Fed Reserve Bank President, July 7, 2008
As you point out, the holding company is not the bank; and it is not entirely clear what, if anything, the holding company owned aside from the bank.
Bloomberg says the holding company has $50-$100 million in assets. I think we are supposed to believe that this is what it owns other than the bank.
My biggest concern, frankly, is whether this increases the cost to the FDIC or not. That is, whether the BK of the holding company will make it more difficult for the FDIC to find a buyer for the bank (if that is even plausible any longer outside the holding company's BK).
I don't know the answer to that, and Bloomberg's not tellin' if it knows . . .
Perry is Pasadena, California-based IndyMac Bancorp's sole remaining employee
Are you still an egomaniac if the company truly does revolve around you?
Are you still an egomaniac if the company truly does revolve around you?
I'm willing to bet that having to answer all the phones, clear all the paper jams in the printer and make all the coffee has probably done a number on the egomania thing.
Obviously, there was no choice other than BK. A CEO without a cadre of flaks and assistants is just too lonely a CEO . . .
What's the difference between The Netherlands and Holland?
"sole remaining employee"
I'm sure he has several temps to do the menial jobs for him. I just love how he went for a "haircut" on the thursday afternoon prior to seizure-much irony in that situation IMO
Ciao
MS
FDIC never takes receivership of bank holding companies. Only the bank or banks are involved. This is not a well known fact with bank closing procedures. It does some times cause problems for the FDIC especially when bank records are held at the holding company level rather than in the bank's archives. There are several other unique issues FDIC must face regarding bank holding companies when it does not have access to the holding company records especially when fraud is involved as it often is.
Liz,
A parent company is usually not liable for debts of a subsidiary unless the parent guaranteed obligations of the sub. They hold the stock and that is the extent of their risk (entities this large are not susceptible to undercapitalization rules).
These relationships are frequently for tax purposes or to facilitate purchase transactions (same shareholders in a purchase or sale). If purchases and sales are easier, that tends to make the stock more valuable (liquidity principle).
Holland is only a part of The Netherlands, which is the official country. Holland is an old regional name that people use colloquially to mean the whole - sorta like if people used New England to refer to the US.
FFDIC,
The FDIC thinks this will be a quick takeover. A friend of mine passed on the job because the time frame was too short.
Time will tell...
And no doubt all sorts of lawyers and economic types are smiling to themselves about how clever they've been in drawing these fine and irrefutable distinctions. I furthermore bet that the paper cups are accumulating the the printer is still jammed. But I'm the grumpy sort.
Bank holding companies have also been known to later purchase the assets of its own failed bank from either FDIC or RTC. First City National Bank Houston's holding company (First City Bancorporation)with very nice political connections on a state and national level comes to mind. Chutzpah! Holding companies are notorious for sucking all of the bank's profits upstream and into the holding company before its bank fails. This will be a part of the FDIC's investigation. However, the FDIC does NOT conduct massive investigations of these failed banks unless it thinks it will be cost effective to sue the directors and recover funds larger than the cost of litigation. All failed banks pass a cost test before authority to sue the directors is approved in DC. If a failed bank fails the cost test for future litigation then the investigation is closed out and the rotten bankers are off the hook because their pockets and insurance (if any) are not worth FDIC's time and trouble to pursue. Been there, done that, got the t-shirt.
First City turns corner on final days
First City turns corner on final days - Houston Business Journal:
First City Bailout Completed Amid Criticism of Wall St.
First City Bailout Completed Amid Criticism of Wall St. - The New York Times
I suppose his desk, desk kit, PC and phone are the assets that can be sold to satisfy creditors.
If you are interested in legally important distinctions (as I am), you should read the court filings and not rely on press reports (Bloomberg or otherwise).
This is why I hate being sourced by the press you can spend 20 minutes explaining one small point and they still completely mangle it.
evensong,
I'm busy and I'd rather invest using soundbites from CNBC. "Sound Balance Sheet!" - what else do you need to know?
...A CEO without a cadre of flaks and assistants is just too lonely a CEO . . .
Not to worry. I'm sure there's an ambient tape of people saying "yes" and "brilliant" that he can play in the background as he goes about his routine.
Bloomberg has since spiffed up the story, by the way. Here's Update 4:
IndyMac Bancorp Files for Liquidation After Seizure (Update5) - Bloomberg.com
I'm willing to bet that having to answer all the phones, clear all the paper jams in the printer and make all the coffee has probably done a number on the egomania thing.
actually, i believe Perry was evicted from indymac's offices by the FDIC, which would be why he doesn't have access to indymac bancorp's books and records. it's more likely that his new office in the garage beside the kitty litter is what did a number on the egomania thing.
The FDIC ``has been in sole possession custody and control of all of the books and records of'' IndyMac Bancorp and the court filing was made without access to information that bankruptcy laws typically require, Chief Executive Officer Michael W. Perry said in court papers.
FFDIC or Lama or anyone else here with knowledge of the FDIC,
I'm a producer for This American Life. I did an hour-long program on the housing crisis, which was mentioned on CR:
Calculated Risk: Chicago Public Radio: The Giant Pool of Money
I couldn't have put that program together without CR and Tanta and all the amazing commenters. And now I'm coming back to the well again. I'm thinking about trying to do a story about what happens when the FDIC has to take over a bank. Would anyone with knowledge on this matter like to talk with me? My e-mail is alex@thislife.org.
thanks.
his new office in the garage beside the kitty litter
So that's where that 44-pound cat came from. You know, Meowzilo.
I took out a $100K IndyMac CD in January that matured one week after the FDIC took over. I am still waiting to hear when I will be paid by the FDIC. The good news is that the interest was paid monthly, but the last payment was 07/01/2008.
Bummer that I barely missed getting out of this on time.
I also bought a NJ Bond a week before the ARS market imploded, and I bought ELN yesterday.
Effe
You wouldn't expect a brilliant, qualified reporter to distinguish between a bank and a bank holding company, would you? So silly to split hairs that way.
Wow effen...them's some bad lucks; I hop the pendulum swings the otherway for you soon...but in the mean time, why don't you let the board know your next move so we can...ahhh...erm...act accordingly.
Too bad about that brain-disease-causing-company...I think they have a pump-monkey on this board somewhere, too.
"IndyMac was seized by U.S. regulators on July 11 after a five year run of fraud left the mortgage lender strapped for cash."
--FIXED
Netherlands is always the whole country. "Holland" is technically the two provinces of North and South Holland where the most concentrated population centers are. This does not stop the Dutch from chanting "hup hup Holland" to cheer on their national soccer/voetbal team, so the terms are somewhat interchangeable, but "Holland" can be taken as an elitist snub in the case where "Netherlands" would be more accurate. If you want to be safer in referring to the west-coast population center, "Randstad" is a better term.
Bloomberg doesn't report on the ramifications because of the obvious - they don't know.
"We cannot and will not allow a wage-price spiral to develop. "
Looks like we've got the first half of that under control.
it's more likely that his new office in the garage beside the kitty litter is what did a number on the egomania thing.
Man, that's cold.
I would have thought that IndyMac Bank owned enough vacant commercial REO that they could have found an office for him to rent for $10 a month.
Not to justify a clear error, but isn't this slip just an implicit recognition that the technical separation of banks from their holding companies, insisted upon for a variety of once-deemed-important reasons, has become a legal fig-leaf with little remaining utility? The mere fact that the HC was sitting on $100M in assets while its bank sank seems like a lot of cash skimming from a failing business.
Indymac didn't own any real estate to speak of. Give mgt a tiny piece of credit for seeing the bubble in CRE and selling what little RE they owned.
The Holding Company BK is meaningless. The creditors are the professional service firms who haven't been paid in full: E&Y, Alston, JPMC.
I'm not a lawyer, but I thought the most interesting sentence is that Perry is the sole employee. That means that at some point this month all the other executive officers (who were officers of both the HC and the Bank) quit the HC... and not a moment too soon since after the takeover there was a ginormous conflict of interest b/t the two entities. I wonder if those idiot officers figured out in time that they had to resign from the HC before doing anything at the Bank that might have hurt the value of the HC. If not, say Hello to Lawsuits guys and gals.
interesting quirk of federal banking law (and I don't know if this is still true, or not)--the shareholders of a failed federal institution used to be personally liable for an amount equal to the par value of the shares they owned. If the only shareholder is a bank holding company, the bankholding company, but not its shareholders, would have the liability.
I'm beginning to wonder if re-introducing in a meaningful way (the old law was ludicrously easy to evade), the idea of personal liability for the owners and managers of regulated financial institutions might not be a good idea. Forget clawing back restricted stock bonuses of the corporate architects of disaster, take them for all they are worth. And if you own stock in a brokerage house, you're personally on the hook for its debts.
Call if the Lloyd's of London approach. Every syndicate membership comes with a cartridge for the Purdy's, in case that's necessary, Brigadier. Of course, critics of my idea might note that Lloyd's in the days of unlimited personal liability was not exactly a paragon of disciplined risk management. Oh well, the road to Hell . . .
The mere fact that the HC was sitting on $100M in assets while its bank sank seems like a lot of cash skimming from a failing business.
You can't be serious. You've no idea why there was $100MM at the HC. Could have been a requirement for financing they were getting. Could have been funds from Perpetual Preferred that hadn't yet been paid down to the Bank. Point is, you have no idea and there's certainly nothing wrong with this on it's face.
"We cannot and will not allow a wage-price spiral to develop. "
"Mr. President, we must not allow a mine shaft gap!"
YouTube -
POE.....POE......POE.....
Ciao
MS
I'm trying to follow along....
...so a holding company is yet another off-balance sheet entity, except this
one is the suitcase they pack all the
profits in?
Can I haz a holding company?