So… what exactly happened over the weekend? It! Yes, it! About 3 o’clock on Friday the FDIC took over the failing Indy Mac bank. I knew it was coming but I wasn’t expecting it to happen so abruptly. And you wanna know how I knew it was coming? Cause the signs were everywhere.

2006 – Indy Mac is sitting fat. They are writing tons of new home mortgage loans. But no, not those scummy sub-prime ones like all the other lenders. They have found their niche in the home loan market, as an alt-A lender. The alt-A market are those people who can’t qualify for a prime loan, yet they are one late payment away from falling into the sub-prime category. Hell at some point, Indy Mac got so comfortable with servicing this new found market, they starting qualifying folks for loans without even verifying their income. And boy did the new loans start rolling in. Indy Mac’s valuation shot up to $3.5 billion. Their stock is trading at nearly $60 dollars a share, up nearly 100% over the past two years. Things are just great for the Mac.

Late 2007 – Bamboozled homeowners do not realized that their cheap mortgage payments are about to sky rocket as the end of these seductively low interest or no interest teaser rates looms. Since they were barely able to make the low payments, there is no way they can make the now nearly doubled payments. Foreclosure is eminent. People start walking away from the dastardly loans deals. And the bottom literally falls out of the mortgage industry. All the interest and principal payments the banks were expecting to receive never arrive. And now the banks are stuck with a defunct loan agreement and a nice pretty house that won’t sell in a deteriorating market.

Indy Mac did not lend in the sub-prime market… their mortgagees are able to handle the new higher payments, right? Not right, remember they did not even verify income for their mortgagees, so who knows what they are able to handle. So no, Indy Mac is not immune. They too are stuck with billions in unpaid mortgages and nice pretty houses that won’t sell.

January through June 2008 – Indy Mac’s losses from loans continues to swell. That bank’s valuation is nearly a fraction of $3.5 billion and stock prices continue to fall… and fall… and fall. Shares that were trading at $60 only two years ago are now barely trading for 60 cents.

End of June 2008 – Here comes Senator Schumer… He warns the feds that Indy Mac is on a collision course with absolute ruin. Word spreads fast and money starts gushing out of Indy Mac like water through a broken dam. In less than two weeks depositors withdrew more than a billion dollars. This ain’t a good thing for any bank, let alone a bank that is already barely solvent. The banks liquidity takes quick and steep tail dive. They have no cash!

July 11 – The FDIC rolls up… tells Indy that they gave it a nice try, but since they couldn’t figure it out… the big boys are here to shut the game down.

So what’s next… I am not sure what’s going to eventually come of Indy Mac. But its depositor’s can be comforted that their money is insured by the FDIC. Apparently the process of getting depositors their money back is simple. The feds should have made it available to account holders today… well that is for deposits up to $100,000. For those who have over $100,000, they’ll likely incur some loses.

But the one thing that I can’t seem to shake about this whole situation is that Lyle Gramley sits on the board of directors at Indy Mac. Mr. Gramley served as a former governor of the Federal Reserve. That’s a pretty good ally to have in your pocket… well it should be at least. With members that include people like Mr. Gramley, how could the board have allowed Indy Mac to go so astray? I just don’t get it.