I can’t speak to this individual investment in IndyMac because I don’t know enough details, but John Paulson, the one guy who’s made more money on the real estate/banking decline than anyone else, is buying…
It’s completely anecdotal, but at least one guy that folks have universally deemed to be “smart” on the credit front is now taking the other side of the trade in some manner. Of course it could still blow up on him, but someone out there is seeing value in these turds. Only time will tell.[/quote]
Some excerpts from the article:
IndyMac Bancorp, one of the largest banks to fail as a result of the subprime mortgage crisis, is close to being sold to a consortium of private equity and hedge fund firms in a complex deal partly financed by the federal government, people involved in the deal said.
…
The team of buyers include the private equity firms J. C. Flowers & Company and Dune Capital Management and the hedge fund Paulson & Company, the people involved in the deal said. It was unclear exactly how much capital the buyers would inject into IndyMac, but they would be shouldering a portion of the losses the bank may have on mortgages and other assets, these people said.
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Then in September, the Federal Reserve eased regulations to allow private equity firms and hedge funds to acquire larger portions of bank holding companies and gave them more control over the banks, including representation on bank boards.
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Longtime foes of the private equity industry, like the Service Employees International Union, have raised concerns about allowing banks to be controlled by private investment firms. They argue that private equity firms would saddle banks with dangerous amounts of debt and exercise undue influence over lending practices.
Well, this dude either sees value in the turds or value in being backstopped by taxpayers coupled with the ability to operate with loosened regulations. My bet would be on the latter. Plus, I don’t trust any “federally-financed” deals that occur in the waning weeks of the Bush administration. This just looks like more of the same to me – the gains will go to private parties and the taxpayers will be stuck with the losses.
