The Pasadena-based mortgage company is eliminating 3,800 jobs and has stopped taking loan applications, the latest indication of serious liquidity problems – so serious that regulators have advised the company that it is no longer considered "well capitalized." This doesn’t mean IndyMac is about to go under; banks that are “well capitalized” have the highest level of safety. One step below is “adequately capitalized” and after that is “undercapitalized.” So there is a small amount of cushion still left, which is why the company is paring back its operating costs so much in an effort to stay alive.
The Pasadena headquarters will be among the offices around the country taking hits. Instead of its regular severance package, IndyMac will give employees at least 30 days notice, with a minimum of $20,000 going to those with more than five years of service. CEO Michael Perry asked the board to cut his base salary of $1 million by 50 percent. "All we can do is continue to work hard and do our very best to keep IndyMac safe and sound, so that we can rebuild our workforce and shareholder value when the housing and mortgage markets stabilize," Perry said in a letter to stakeholders.
We have been working closely with our federal banking regulators with respect to the actions that they and we must take to meet our mutual goal of keeping Indymac safe and sound through this crisis period. In that respect, based on information we have provided to our regulators, they have advised us that we are no longer "well capitalized", which we stated on May 12 was a possible scenario. Our regulators have also asked us to submit to them a new business plan for their review and approval, something on which we have been working with them for some time. We have agreed on the basic elements of the plan, and the regulators have directed us to begin executing on it. An important element of our plan is to improve our capital ratios.
Perry says the company hasn't been able to raise additional capital, and he doesn't expect any interest "until there is more stability and less uncertainty in the housing and mortgage markets." But when will that be, and can IndyMac hold on? Wall Street is not encouraged; the stock was trading at 67 cents a share in after-hours trading. No mention in Perry's letter about possible buyers, although that still seems like the company's best bet - assuming there are any interested takers. (LABJ, WSJ)