Tough Day in Paradise

The US financial landscape saw some large new litter today. IndyMac Bank became the second largest bank seizure in US history. The OTS moved to exercise its power and take control of the bank. In short order, control was handed off to the FDIC. A large portion of the deposit accounts were declared uninsured under the FDIC $100,000 limit per account.

This event, coupled with another decline in stock prices for Fannie Mae and Freddie Mac spells trouble on Monday. Could we see another Black Monday around the corner? I doubt it. Congress moved quickly to prop up Fannie and Freddie, opening the discount window midday today.

Clearly it IS time for bank management at all levels to take heed. Stress test any and all loan portfolios with mortgage product. I do NOT advocate exiting the mortgage business. Quite the contrary. I propose that community and regional banks expand mortgage operations. Go back to pre-1960 banking in respect to home loan finance.