Financial Finger-Pointing Turns to Regulators 
By LOUISE STORY and GRETCHEN MORGENSON
Published: November 22, 2011

Putting the spotlight on former IndyMac CEO, Micheal Perry, who recently set-up a self-serving blog to try and achieve a sympathetic audience for the justification of the demise of his company and the charges brought by the SEC. The NY Times writes:

“In the whodunit of the financial crisis, Wall Street executives have pointed the blame at all kinds of parties — consumers who lied on their mortgage applications, investors who demanded access to risky mortgage bonds, and policy makers who kept interest rates low and failed to predict a housing market collapse.

But a new defense has been mounted by a bank executive: my regulator told me to do it.

This unusual rationale is presented by the bank executive in one of the few fraud suits brought against a mortgage banking official in the aftermath of the financial crisis — the one filed by the Securities and Exchange Commission against Michael W. Perry, former chief executive of IndyMac Bancorp, which failed spectacularly in mid-2008.

After being accused of fraud and misleading investors about his company’s financial health just before it collapsed, Mr. Perry set up a Web site this fall to defend himself.”

Mr. Perry blames federal regulators for his misdeeds, however it appears there is much more to the story than regulators would have been privy to. The NY Times details the history and provides this background:

IndyMac’s Survival Struggle

“The S.E.C. case against Mr. Perry, IndyMac’s longtime chief executive, and two former chief financial officer centers on disclosures made from February through mid-May of 2008. The disclosures related mostly to IndyMac’s capital and liquidity. The bank collapsed in July of that year and was taken over by the F.D.I.C., which had to pay insured depositors $10.7 billion.

By early May, it had become clear inside IndyMac that it could no longer be considered “well capitalized” unless money was shifted from its holding company.

This meant that IndyMac could not accept so-called brokered deposits, large amounts of money from investors looking for the highest possible rates of return. Brokered deposits represented just over a third of IndyMac’s deposits; without them, it would have been out of business.

And so on May 9, Mr. Perry instructed his deputies to shift money into the bank from the holding company and account for $18 million of it as if it had been there on March 31.”

Didn’t Martha Stewart go to prison for less than something like that? The finger pointing in this case and the “he said, he said” isn’t all that took the financial giant to its knees. Anybody that has an IndyMac loan and a home severely underwater knows that there is a lot more to the story.

You can visit Mr. Perry’s NOT TO BIG TO FAIL blog and comment – not sure if he’ll post – so come back here and we’ll post your comment.
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By DEADLY CLEAR

After trying to post on Mr. Perry’s site and tired of waiting (maybe he just wasn’t home today to approve it), here goes:

Mr. Perry –

Let’s start first with the fact that IndyMac had a fine group of employees that enjoyed providing mortgages to folks all across America.

Then let’s take apart your industry that started to base the amount of the loans on the borrowers’ credit and willingness to pay – rather than actual property values.

When your company shopped for inflated appraisals to match the magic numbers, rather than stick with strict appraisal parameters, the inflation got out of hand. You had to have known this – but it was hard to be competitive when guys like Countrywide’s Mozilo were grabbing the market. The inflated appraisals were a material misrepresentation on the borrowers and on the investors – no matter who did it or accepted it.

Next, these loans did not get assigned or transferred to the trusts by the trust Closing Dates (or even the grace period thereafter) and the attempt to do so at the time of default was, again, a material misrepresentation; this time on the borrowers, the investors, the state recordation offices and the courts. Empty trusts and failed REMICs. You had to have known this too.

Now, let’s talk about the ARMs and false promises. ARM loans, based on the consumer “credit analysis and willingness to pay” program, were defective products that invited fraud – especially when the systematically abandoned underwriting guidelines kicked-in. Yes, Mr. Perry – IndyMac did “no doc” or relatively little documentation loans too. Even as the credit freeze hit in January 2007 – IndyMac continued to use ARMs, HiBORS, LIBORS, HELOCS knowing that there was more than a good chance there would be no refinancing capability.

Your employees told people what to say and how much to state as income to get a mortgage and then promised them that they could “refinance if they made all their payments and kept their credit in good standing.” This was the Ponzi scheme – because eventually there would be no ability to refinance. The homes would be over-priced and under-water leaving the homeowner with a huge interest payment that you knew or should have known he couldn’t pay. You did not vet the borrower for the increased interest rate at the end of the ARM – because you promised him that he could refinance and “not to worry.” This was unethical. It was material misrepresentation – and you had to have known what was happening. IndyMac was the epitome of this Foreclosure Mom Rap song:

Let’s face it – your industry was in for a short term financing scheme based on fees and defaults that you could churn and burn. You didn’t care about the consumer, or his neighbors, the investors, the states or the federal government. Frankly, I’d be more concerned about the lack of integrity and ethics. Look at the families your industry has ruined, the lost of pension and retirement funds, college educations, equity, the unnecessary deaths, divorces and homelessness. Your karma has to be looking you square in the eyes.

Stop whining that that the government is unfair to you – and start figuring out how you can help to make it up to millions of families and try to balance out the wrongs you were or should have been aware of. You are a smart man, Mr. Perry. Put some of that intelligence to perform good works. Maybe you need to start testifying on behalf of the borrowers and investors that got screwed and enlighten the courts as to the facts of the entire scheme. Or help the states’ attorneys general. But put it to good use and turn things around for yourself – come clean, because life is too short.