Mover Mike

That’s a sick feeling in the pit of my stomach I’m experiencing. Mike Shedlock points out that on IndyMac’s blog is a letter to shareholders:

…we have been working with our investment bankers to raise additional capital. To-date, we have not been successful with these efforts, and, while we will continue these efforts with our bankers and others, we don’t expect to be able to raise capital…

If you’ve had any financial ups and downs in your life, you know what that means. You need money to pay your bills or meet your margin calls or maintain reserves, etc. and it’s all gone. It’s all gone!

…based on information we have provided to our regulators, they have advised us that we are no longer “well capitalized”, which we stated on May 12 was a possible scenario.

Without an external capital raise, the traditional way to improve safety and soundness is to sell assets and shrink the balance sheet, which in normal times generally has the effect of improving capital ratios and bolstering liquidity. Yet in this environment, where either there are no bids for most of IMB’s mortgage loans and securities or the bid/ask spreads are abnormally wide, “fire-selling” assets would actually deplete capital further.

Indymac (IMB) in 1993 had four employees! Now employment will be reduced from 7200 to 3400 and the severance package that was so generous in the past, “one month of pay and one month of Indymac-paid COBRA insurance coverage for each year of service”, is out the window.

One of the nation’s biggest mortgage lenders, Indymac traded over $45 in Mid 2006, closed today at $0.71! (See chart)

Shedlock writes, “It’s all over.”

Tags: Business //
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