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It seems like just yesterday that IndyMac Bancorp CEO Michael Perry was telling analysts and shareholders that everything was OK with the nation's second-largest independent mortgage lender following its first ever quarterly loss and it could weather the storm without selling. Now the bank holding company has taken a rather unorthodox step: It will liquidate its assets in a bankruptcy court through a Chapter 7 filing. So how did the Pasadena, Calif.-based institution land in the bankruptcy court -- especially in light of the fact that banks aren't allowed to file bankruptcy?
Well, for starters, it wasn't yesterday, but February, when Perry swore off a sale of IndyMac. Fast-forward exactly five months later, and the Federal Deposit Insurance Co. seized IndyMac as depositors began a run on the bank. While banks are forbidden from the bankruptcy process, bank holding companies are not. Consequently, the assets not under FDIC tutelage will enter the bankruptcy proceedings. It seems IndyMac really had no other option. Even the FDIC's chairwoman, Sheila Bair, reportedly conceded in an upcoming Bloomberg TV interview that the bank was unattractive to buyers because of its obvious mortgage losses. IndyMac has been pummeled by the subprime mortgage crisis and now has liabilities that are estimated between $100 million and $500 million, according to the Chapter 7 filing. The bank holding company also noted it has less than 50 creditors. IndyMac is the first bank holding company to file a Chapter 7 -- at least during the current credit crisis -- but the FDIC has taken over several other banks that have failed this year:
Who knows, may be some of them will follow IndyMac's lead. - Maria Woehr See Chapter 7 filing petition (pdf) Categories Deal Video
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