IndyMac being sold to private equity firms

IndyMac Bancorp is one of the biggest banks that have come crashing down due to the subprime mortgage crisis. Now it is all set to be sold off to a consortium consisting of private equity and hedge fund firms. 

Federal regulators had declared the bank as being insolvent back in July which followed by a takeover of the company. A team of former Lehman Brothers bankers that are currently working with Deutsche Bank along with the Federal Deposit Insurance Corporation have been looking to strike a deal ever since then. The two parties have finally come to a settlement and the official announcement of the sale could be made on Monday.

When IndyMac came crashing down it was recorded as being the second largest failure in the history of FDIC. Their record was however soon broken when bigger institutions the likes of Washington Mutual and Wachovia also came crashing down.

The team of buyers that will be gaining control over IndyMac include different private equity firms such as Dun Capital Management, J.C Flowers & Company and Paulson & Company. 

This deal that involves a group of unregulated private equity firms taking over a bank holding company is the first of its kind. Although private equity firms have come to the rescue of the many failing banks federal regulators are now backing off due to the regulatory concerns that arise out of such a situation. 

September saw the Federal Reserve easing the regulations that made it possible for private equity firms and hedge firms to take over portions of bank holding companies. They would not be subject to any undue regulation if they did so. The latest deal that involves the selling of IndyMac includes all of its 22 branches, $176 loan servicing portfolio and reverse mortgage unit. 

The deal works out as a coup for Dune Captial which was founded by ex-Goldman Sachs partners Daniel Niedich and Steven Mnuchin in 2004. They are joined with other partners in this cheap deal for a big bank. 

The announcement of the failure of Indymac saw around 130 F.D.I.C employees rush to the rescue of the bank in an attempt to get it to open up under government supervision. Tight capital markets however caused further losses on mortgages that the bank was unable to sell and the defaults continued to mount. Panicked consumers ended up withdrawing over $1.3 billion deposits in less than 11 business days leading to the crash of the institution.