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Rent-Seeking

March 16, 2011, 2:57 pm

I know the FDIC is often in a hurry to place assets from failed banks, but this deal appears absurd

The only way I can find that their math might be wrong is if in the loss payment calculation, the contract might add the value of the promissory note to the short sale proceeds, but that does not change the gravy train here.

Tags: ,
Category: The Corporate State

3 Comments

  1. Brian Johnson:

    From the info. I find on the internet (with a simple search of Indymac sale), it looks like OneWest is basically paying $13.9 billion for a combination of $6.9 billion in securites, $16 billion in portfolio of loans, and a huge portfolio of business in MSR (mortgaging servicing rights). If one assumes they are paying $1/$1 for the securities, zero for the MSR, then it looks like they are paying $7 billion for $16 billion face value of mortgages. (approx. 44% of face/par value). OneWest will absorb upto a 20% loss, after which the FDIC will absorb the next 10% of losses at a 80/20 split, and a 95/5 split for losses beyond 30%. Of course, assuming $0 for the MSR is a little ridiculous on my part, but I have no idea what that is worth. (Perhaps its worth much more than $7 billion, or maybe its a breakeven type of business????)

    March 16, 2011, 5:50 pm

  2. Don:

    So, I should buy houses that are in foreclosure by IndyMac/One West for $100? Then they make all their money, I get a sweetheart deal on the house, and somebody else picks up the tab (that would be the the rest of you sucke^H^H^H^H^Htax payers :^).

    Sounds like it's time to become a slum lord, the price is right.

    March 17, 2011, 8:11 am

  3. Ted Rado:

    Why in the world does the US government get involved in the housing market? If you can afford a house, the bank will lend you the money. If not, they won't. That system worked fine. Now the USG encourages people to buy a house they can't afford, and twists the bankers' arms to loan them the money. When the inevitable happens, the USG dreams up bailout schemes for banks and homeowners. What a mess. The village idiot could do better. Get the stupid government officials out of the housing (and every other) business and let natural economic forces prevail.

    March 17, 2011, 10:50 am