Jesus, Breeze! Slow the hell down. I see you’ve learned absolutely nothing from our prior discussions.
From what I can surmise, the taxpayers are NOT financing “91% of this deal.” You simply don’t know enough about banking to comment intelligently on this stuff. The article clearly states that IMB will be taking on $6.5 billion in deposits in the deal. Deposits are liabilities, Breeze. I thought I cleared that up in a prior post.
Now, part of the problem here is that I THINK the reported “deal value” is not the ACTUAL deal value. From what I can gather, the FDIC is selling ASSETS with a (discounted) value of $13.9 billion (in addition to deposits and branches) to IMB, whereby IMB will put up $1.3 billion in cash in order to capitalize the company. I believe that in this instance the reporters (who will just quote each other until someone corrects them) are confusing the amount of assets being sold with the “deal value,” not realizing that a bunch of liabilities are being transferred along with the assets. Reporters often get the facts confused in complicated deals (which this one is).
For some perspective, IndyMac’s PEAK market cap – back during the Bubble – was just shy of $3 billion. Now does it make any sense whatsoever for an investor group to pay $13.9 billion for a now failed company that previously had a peak value of less than $3 billion as a healthy company? Please. So, I’m pretty sure that the reporters have got something screwed up here and we’ll find out in due time.
I suspect that the investor group is putting up $1.3 billion in cash to capitalize the new company, then they’re taking on $6.5 billion in deposits, they’ll raise another $2 billion in the wholesale deposit market, and fund the remainder of the assets with FHLB borrowings. That would result in a pretty normal S&L structure. And then they have the loss sharing agreement with the FDIC.
Now, my read could be wrong here. And I’m willing to admit that. But what I know for sure is that we still don’t have enough information on this transaction to know exactly what’s going on here. So, why don’t we heed the following from the FDIC’s website and wait until we have more info: “The transaction is expected to close in late January or early February, at which time full details of the agreement will be provided.” This may be a horrible deal for us taxpayers. But, frankly, until we see the balance sheet and actually understand more about the deal, we simply don’t have enough information to know.
