The Los Angeles Times is good to point out that the consortium of billionaires and might-as-well-be-billionaires, including George Soros and John Paulson, who bought the former IndyMac from the FDIC is making out like bandits on the deal.
They put up $1.55 billion for the failed bank last March and took in $1.57 billion in profits through the end of 2009. The FDIC is on the hook for a potential $11 billion hit.
As one of its sources asks, what kind of a sweetheart deal was this?
We’ll probably never know:
The huge gains included a fourth-quarter entry of $830 million for assets other than a bank’s main source of income, interest on loans. There was no explanation for the huge gain on the report, which has far fewer details than a public company’s financial reports.
The FDIC is funded by member banks, so at least the taxpayers aren’t on the hook for this—yet. There has been lots of noise about whether the FDIC will eventually have to be bailed out by the government.
One question for reporters is why the FDIC doesn’t require greater disclosure for banks that it’s sold off like this.
“I’m dumbfounded,” Ely said. “These are just incredibly sweet numbers, but you can’t see what’s behind [them]. The public policy question is, why are they so good? Particularly given the magnitude of the loss estimated at the FDIC.”
Indeed.
(h/t Bob Hagerty)
Ryan Chittum is a former Wall Street Journal reporter, and deputy editor of The Audit, CJR’s business section. If you see notable business journalism, give him a heads-up at rc2538@columbia.edu. Follow him on Twitter at @ryanchittum.