SA Business News


 
SA Business News

Monday, July 14, 2008
By Staff Writer, Marc Stein
Freddie and Fannie Stumble, IndyMac Falls, Who’s Next?
Freddie and Fannie are in the midst of a government supervision and restructuring, IndyMac is under government bailout after a collapse on Monday; is there more to come?
Duringthe late 1980’s and early ‘90’s over 1,000 banks went under. It is unknown on the private market how many banks are for sale or how many mergers we will see, but it is known that there more banks will take the tumble in the next year. Six lenders have failed so far this year with another seven making the “danger zone” list. In 1994, the Federal Deposit Insurance Corporation listed 575 banks that it considered troubled.
Even after the Feds announced the Freddie and Fannie bailout on Sunday, the market did not return the favor with the news of IndyMac leading the day.. With $32 billion in assets, IndyMac, a spinoff of the Countrywide Financial Corporation, was the biggest American lender to fail in more than two decades. The greatest concern is that IndyMac was not on the governments list of endangered banks last spring.
The F.D.I.C. has $53 billion set aside to reimburse consumers for deposits lost at failed banks. IndyMac will eat up $4 billion to $8 billion of that fund, the agency estimates, and that could force it to raise more money from the banks that it insures.
With Freddie and Fannie holding one half of the nations mortgages at 1.3 trillion dollars investors lacked confidence, many concerned over the details of the plan now being structured in Congress. Details are yet to unfold, but the Fed has stated through Chairmen Henry Paulson that they will lend, without limit, to Freddie and Fannie at a rate of 2.5 percent.
Large institutions, due to report this week, appear to be more solvent than smaller institutions.
 
 
 
 
During the late 1980’s and early ‘90’s over 1,000 banks went under. It is unknown on the private market how many banks are for sale or how many mergers we will see, but it is known that there more banks will take the tumble in the next year. Six lenders have failed so far this year with another seven making the “danger zone” list. In 1994, the Federal Deposit Insurance Corporation listed 575 banks that it considered troubled.
Even after the Feds announced the Freddie and Fannie bailout on Sunday, the market did not return the favor with the news of IndyMac leading the day.. With $32 billion in assets, IndyMac, a spinoff of the Countrywide Financial Corporation, was the biggest American lender to fail in more than two decades. The greatest concern is that IndyMac was not on the governments list of endangered banks last spring.
The F.D.I.C. has $53 billion set aside to reimburse consumers for deposits lost at failed banks. IndyMac will eat up $4 billion to $8 billion of that fund, the agency estimates, and that could force it to raise more money from the banks that it insures.
With Freddie and Fannie holding one half of the nations mortgages at 1.3 trillion dollars investors lacked confidence, many concerned over the details of the plan now being structured in Congress. Details are yet to unfold, but the Fed has stated through Chairmen Henry Paulson that they will lend, without limit, to Freddie and Fannie at a rate of 2.5 percent.
Large institutions, due to report this week, appear to be more solvent than smaller institutions.