March 22, 2009

US FDIC Covering Bond Holders?

Something doesn't quite sound right here: 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.
How can the FDIC accumulate $10.7 billion in losses while covering $6.4 billion of deposits? Sounds like the FDIC is taking a fall for other creditors of IndyMac as well. Is this really the purpose of FDIC? I thought it was only supposed to be for deposit insurance.

No comments: