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"We are reviewing the recently announced governmental programs to determine which programs, if any, might be available and appropriate for us," Downey chief executive Charles Rinehart said in a statement. The bank divulged the news after reporting another dreary earnings quarter Wednesday. The Newport Beach, Calif.-based bank reported a third-quarter loss of $81.1 million, or $2.89 a share, from $23.4 million, or 84 cents, a year earlier. Downey has looked to right its sinking ship. The bank put itself on the auction block and is looking for outside capital, but no takers have come forward. The company has also looked to sell real estate holdings, including its Newport Beach headquarters,
and cut costs by laying off 200 people in its mortgage lending department, which no longer offers option arms. But those band aids have proved ineffectual as the credit markets have frozen and would-be investors have become reluctant to invest in a bank that carries a scarlet letter for its questionable balance sheet and former connection to option arms, which gave borrowers the choice of making lower payments initially but guaranteed rates would eventually rise. Additionally, if its Web site's list of 822 bank-owned properties in Arizona and California (two states hit hardest by the real estate bubble) is any indication of its mortgage troubles, it likely is fighting an uphill battle to win a Treasury investment rather than an FDIC seizure. - Gerald Magpily See Los Angeles Times article
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California savings and loans Downey Financial Corp. is the last bank standing in a sector that concentrated on offering high-risk home loans known as option arms. Just a few years ago, there were as many as five big players specializing in that market, but the tsunami of failed mortgages and reduction of available credit pushed Downey's bigger peers into extinction. Now, the 50-year-old firm is possibly down to its last straw and indicated through a statement that it would look for help from the $700 billion federal bailout package. 
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