The Federal Deposit Insurance Corp. said late Thursday that it has completed the sale of IndyMac Federal Bank FSB, the firm it took over last year, and that it took a $10.7 billion loss on the deal, far more than originally expected.
The FDIC said OneWest Bank, FSB, a newly formed Pasadena, California-based federal savings bank organized by IMB HoldCo LLC, would assume IndyMac's deposits.
"As of January 31, 2009, IndyMac Federal had total assets of $23.5 billion and total deposits of $6.4 billion. OneWest has agreed to purchase all deposits and approximately $20.7 billion in assets at a discount of $4.7 billion. The FDIC will retain the remaining assets for later disposition," the FDIC said in a press release.
I mention this for the following reasons:
1.) Nationalization advocates seem to think it's the best thing since sliced bread (at least to my ears). Yet three are no panaceas -- no easy answers to the questions faced by the financial sector right now.
2.) This is in line with the Swedish experience. While advocates point to the Swedish model as one to emulate Sweden still lost approximately 2% of thier GDP on the deal.
3.) I still think the best idea is to use the remaining TARP money to make one giant bank, transfer good assets to it and let the bad assets sit in the remaining shells.
3 comments:
Gee, I suggested this some time ago, even before William Buitler did.
I submitted the essay to the Marketplace radio program in late January, but no interest.
I believe I mentioned the same thing just a while back, but you know the other bankers would howl if that happened. Unfair competition would be the rallying cry. Is this sounding more like the 1930s with each passing day?
I see three more banks folded Friday.
"Nationalization advocates seem to think it's the best thing since sliced bread"
Not at all. Rather, I believe that if the government is going to put $175 billion into a company with a market cap that's smaller than that, then the government should own that company.
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