Mike Perry, who led IndyMac Bancorp until its collapse in 2008, is trying to rehabilitate his image, waging a public campaign rarely seen from an executive of a failed bank.
On a new Web site called Not Too Big To Fail, Perry wrote that he "kept silent for three years," in the hope of being "left alone," but now has decided to defend himself against "unwarranted and false, public accusations" by regulators and other litigants.
"Not one of the lawsuits against me has any merit," Perry wrote. "We should not be penalized because we were not on the favored list of institutions that were deemed 'too-big-to-fail.' "
As the name of the site implies, Perry makes much of the fact that only months after regulators seized IndyMac, the government bailed out "bigger, and far more diversified financial institutions" that "benefited from 'Too Big to Fail' credit ratings and cost of funds. And despite this advantage … all of them needed government help to survive this crisis."
Nevertheless, most of his ire is directed not at rivals that survived but at the agencies that are suing him, whose motives he questions.
For example the Federal Deposit Insurance Corp. (FDIC), which is seeking $600 million to help cover losses from IndyMac's failure, is trying "to gain access to potential settlement proceeds from directors and officers liability insurance." Given the estimated losses of more than $13 billion to the FDIC's insurance fund, one wonders if any open bank or taxpayer would disapprove of such an effort.
Money aside, Perry claims the regulator is trying to save face by "inappropriately seeking to blame former banking executives like me for the FDIC's own failures."
"The private deposit insurance fund, for which the FDIC is responsible, became insolvent during this crisis and remains so," Perry writes. "Without the full faith and credit of the U.S. behind them, they like IndyMac and many others, would have failed." A problem with this argument is that if IndyMac hadn't made so many risky loans, the FDIC would not have had to eat its losses. IndyMac specialized in alternative-A mortgages to consumers without proper income documentation and it should have been no surprise that many of its borrowers defaulted.
The Securities and Exchange Commission (SEC), meanwhile, has exercised "20/20 hindsight judgment" by suing Perry for failing to disclose more information to shareholders. This echoes an argument made by many in the industry and even Federal Reserve Chairman Ben Bernanke, who recently said, "I was not omniscient, I did not see this coming."
Perry claims he tried to settle with the SEC, but that the agency "seemed to be pursuing a larger agenda than the facts of my case." He doesn't say what that agenda might be.
The most persuasive parts of the site point out what the lawsuits do not accuse him of doing. There's no allegation of inaccuracy in IndyMac's financial statements, which were never restated, or of "areas that required significant judgment such as loan losses and secondary-market warranty reserves, credit marks on loans, valuation of loan servicing rights, and mark-to-market accounting."
But Perry made some interesting omissions too. There's no mention of his mentor Angelo Mozilo, the former chairman and CEO of Countrywide Financial Corp., from which IndyMac was spun off. Like Perry, Mozilo has been the target of numerous lawsuits and investigations.
Perry barely mentions the Office of Thrift Supervision (OTS), IndyMac's primary regulator. In 2006, Perry gleefully told investors that the OTS was "the regulator you want to have." The OTS, whose other charges included Countrywide, Washington Mutual and AIG — to name a few crisis casualties — was merged into the OCC this year.
Perry's ire is understandably directed at New York Senator Charles Schumer, who played a pivotal role in IndyMac's collapse when he sent an open letter to several regulators expressing concern about IndyMac's financial condition. The letter led to an 11-day run on deposits to the tune of $100 million a day.
But Schumer's actions also provided cover for the OTS and its then-director John Reich, who claimed at the time that IndyMac failed "due to a liquidity crisis" prompted by the bank run. The reality is that regulators failed to reign in the massive risk and lax underwriting standards of lenders under their watch. Even if the Senator had not yelled "fire!" in a crowded theatre, it's likely something else would have sunk IndyMac.
Perry does offer a sort of mea culpa ("I regret the losses suffered by investors and others as a result of IndyMac's failure"), and some genuinely heart-wrenching personal details about his past health problems.
In his defense, he claims IndyMac tried to pull back from the frenzy. Beginning in 2007, when a handful of independent mortgage lenders had already gone out of business, Perry writes that he began tightening lending guidelines, eliminating loan products and closing lending divisions.
What Perry doesn't say is that standards had practically been eliminated in 2005 and 2006, so "tightening" in 2007 barely made a dent. Loans originated in 2007 have the highest default rates, giving credence to the FDIC's claim that Perry "doubled down" and continued risky lending to gain market share.
The site has hundreds of comments, posted mainly by former IndyMac employees — including one who copied and pasted Walt Whitman's poem "O Captain! My Captain!" in its entirety. Some of the commenters claim to be former IndyMac shareholders whose investments would have wiped out when the thrift was seized. They nevertheless voice support for Perry.
To his credit, Perry is apparently allowing a free exchange of views on his site. Amid all the "you tell 'em, Mike!" messages there is a dissenting comment.
"You don't get it," writes this person, identified only as "Sam." "You failed to manage risks and your bank failed. All the banks should have failed. We need banks but not yours or any of TBTF. Banking is a utility company. Start over with new boring banking, low leverage."