Indymac Follow Up!
July 12th 2008 23:42
James Turk, Founder of GoldMoney, writes today about the seisure of Indymac and the cost to the FDIC. Remember I quoted a FDIC official that Infdymac would cost the fund $4 to 10 Billion. Turk dioes the math for us and it is frightening to say the least.
Turk goes on to say that "$3 trillion of inferior loans probably remaini on bank books." If they were liquidated at the same percent recovery, then they could be valued at only $1.to 1.5 Trillion! How much would be left of the FDIC $53 Billion after Indymac and a large number of banks go under?
After liquidating $32 billion in assets, the FDIC still has to add some $4 billion to $8 billion more to make sure $18 billion of deposits are made whole. So in the worst case scenario, the liquidation value of IndyMac's $32 billion of assets is $10 billion, or in other words, the true market value of IndyMac's assets is only 31% of their stated book value. In the FDIC's best case scenario, the liquidation value of IndyMac's $32 billion of assets is $14 billion, which is still only 44% of their stated book value.
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