FBI eating IndyMac (and cheese)

This week, the FBI has begun to investigate IndyMac for possible fraud. Apparently, the investigation will only affect the company and not the executives of the failed financial institution.

How is it that a country where a Corporate Fraud Task Force was established by Presidential order, a country that decided to throw the book at certain individuals of publicly traded companies will not investigate the very same people responsible for the second largest failure of a financial institution in it's history?

Yet another useless exercise provided by your friendly neighborhood FBI. They show up at the gates of IndyMac's Headquarters while CNN and Fox News film them. The public is appeased, things are looking good.

Shouldn't the executives responsible for the day-to-day operations of the bank not be liable for the loss of $615 million in 2007? Who is responsible for the loss of the $184 million in the first quarter of this year?

Many questions that should be answered. Surely, they should be subpoenaed and made to testify. And if they can't be convicted, they should at least be made to parade on television ad-nauseam so late night hosts can have some material. This is the American way and the former IndyMac executive should not be treated differently. They should be given the respect they deserve, and that's really not much. They have the answers and it's hardly the time for them to be camera shy.

This is only the continuation of the sub-prime mortgage fiasco that's now spreading like a cancer to alt-A mortgages. It's the second chapter in the liar loans series.

For those wondering, alt-A mortgages are a step up from a sub-prime mortgage but a step down from "prime" mortgages. The way it works is that someone wanting a mortgage lies about how much they make in a year, the bank lends them what happens to be an astronomical sum of money comparatively to their annual income and they buy a house that they can't afford to pay back.

IndyMac has been a champion at giving out alt-A mortgages. In fact, if giving out alt-A mortgages was a sport, they would have been on the Wheaties box.

It's giving out all these mortgages without verifying people's income that brought IndyMac to it's knees.

But don't blame the institution itself. They provided mortgages in a market where home buying was subsidized. That's why the FBI is wasting it's time investigating IndyMac. While it certainly is fiscally irresponsible to lend money to someone without verifying their income, it's not criminal to do so. At least it isn't yet.

It's the individuals that where running IndyMac that are at fault. They failed in their fiduciary duty by giving mortgages to deadbeats. By doing so, they failed their depositors and the taxpayers who now have to pick up the tab. For that, they should have the book thrown at them.