Two Private Equity Firms & A Hedge Fund Buying IndyMac Together?

image On Friday the website Mortgage Lender Implode reported that IndyMac was being sold to Dune Capital Management.  Today, the NY Times is reporting that the failed bank is being sold to a consortium of private equity and hedge fund firms… including Dune Capital Management.

According to “people” who spoke with NY Times, the buyers are Dune Capital Management, J.C. Flowers & Company, and hedge fund Paulson & Company.  If true, the deal would be one of the more unusual because it’s one of the first transactions involving unregulated private equity firms acquiring a bank holding company.

In September, the Federal Reserve eased regulations to allow private equity firms and hedge funds to acquire portions of bank holding companies without being subject to undue regulation. Previously, a private equity firm that held more than 24.9 percent of a bank was required to register as a bank holding company and it restricts the investor’s ability to make investments outside of the banking industry.

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Lets hope the FDIC will announce the “winners” on Monday.

IndyMac Is Set to Be Sold to Private Investors (NY Times)

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  • I was hoping this Country had learned its lesson about
    little or no regulation for the thieves at the top. Sure,pour it on the Field Flunkies: The good people working in the trenches who, in large part first and foremost, have the Senior’s best interest at heart.

  • Yes, Admin, it’s always about “growing the Business”, isn’t it. I just ask you to think of what has transpired in the mortgage/financial world and I ask you to think “At what cost to this Great Nation?” In
    Sunday’s Seattle Times, the front page feature was a reprint of a New York Times article of the Washington Mutual debacle Absolutely unbelieable reading to a man
    who was taught long ago to always walk the path of honesty. As thousands of good people lose their jobs
    at WaMu, the guy at the top walks away with over 100
    million dollars with his Company in economic ashes:
    Sheer personal and corporate greed and dishonesty.

  • James,

    You make it sound as if growing a business is a bad thing. I agree the WAMU situation is a mess and there will always be corporate greed and dishonesty, but the fact is that people need to grow businesses to support jobs.

    So while it’s ok to be upset about what has taken place at WAMU, I dont think you should be critizing anyone who is trying to legitimately build a business.

    Sure I’m skeptical about two private equity companies and a hedge fund buying IndyMac, but just keeping it in the FDIC’s hands isn’t helping. They aren’t growing the business… simply trimming it down, closing branches. That doesn’t help anybody.

  • Mt last point is (and I’ll shut up) growing a business
    without proper Governmental oversight (ie., Regulation to catch the crooks)–and hedge funds, to my knowledge,
    are yet unregulated, is a serious mistake. Hell, I would rather see a consortium of smaller Banks like The Bank of Muskogee(as written up in your story about Urban Financial Group) buy Financial Freedom from the FDIC than a bunch of Hedge Fund wizzards who hide their bag of Wall Street tricks from all who should be concerned. I’ll tell you one thing my friend: If Seniors start getting thrown out of their homes due to economic slight of hand, the reaction of the Public will be swift and significant.

  • Folks,

    Looking at different blogs, I see a lot of arguments from folks complaining about wall street greed, lack of govenrment oversight etc. The case of Indymac is little curious given what is tranpiring. The story from the NYT dealbook is really based on story publish by the Mortgage Lender Implode-O-Meter which can be seen here:

    http://ml-implode.com/viewnews/2008-12-26_EXCLUSIVEFDICtoSellIndyMacToPrivateEquityFirm.html

    The FDIC did not follow due dilligence before Mr. Perry and co ran their organization into the ground. It is probably a textbook case of how to keep the Feds off your case in order to get some buyers for your bank. Reading the ml implode article it is clear that FDIC had a difficult task at hand: main objective was to sell Indymac as one piece. The problem that no one talked about in July, was that after Lehman wen bankrupt, the financing of any buyout or merger, especially big ones, of banks or any other entities would become almost impossible. So the Feds got stock with Indy for a long time. So the question is, during this time of very high borrowing costs, who is going to step to the plate with the offer that is realistic?
    The answer is: firms with the leverage in place and most likely from unregulated backgrounds. Remember, most banks or lending institutions either do not have the funding in place or are just sitting on the money from TARP (now THAT WAS A HUGE mistake from Paulson, not looking back at what happened in Japan in the 90’s). For those of you complaining about the sale to private equity firms and hedge fund companies, please read the rules about conservatorship that FDIC has to go by: they technically had 90 days to get a buyer or sell Indymac piece by piece. Another problem was getting a buyer that had a good financial position to make the deal (this is where Goldman Sachs fell apart due to their bad financial position) and another issue was that of a fire sale flipping, ie selling the assest so cheap that a sure profit could be realized quickly by selling the asset at a much higher price.
    An interesting point is that Mr. Perry was trying to get those same private equity firms to invest in the company but because of regulation those firms could not pull the trigger (25% rule).
    So you can make a case for greed, lack or too much government regulation etc. Important thing is to know the facts.

    eqqmc2

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