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From Wall Street’s viewpoint, there’s virtually nothing left of IndyMac Bancorp now.
The stock plunged as low as 34 cents this morning and was trading around 40 cents at about 11 a.m. PDT, down from 71 cents on Monday. The price a year ago: $31.
After the close of trading on Monday the loss-ridden Pasadena-based thrift announced it would drastically shrink its business in a bid to survive.
 But survival as a publicly traded company seems out of the question. Paul Miller, an analyst at Friedman, Billings, Ramsey & Co., said today the stock was headed for zero. "We do not believe that there is any value left for common shareholders," he said in a note to clients.
Just because shareholders have lost everything doesn’t mean the bank has to close. But it doesn’t help IndyMac’s situation.
What about the bank’s stock listing on the New York Stock Exchange? It’s a formality at this point: The shares have been suspended from trading on the NYSE floor since June 26, when they first closed below $1. Instead, they’re trading on the NYSE’s all-electronic ARCA market.
Under NYSE rules, the exchange can act to permanently delist a company once the average trading price of the firm’s shares over 30 days falls below $1.
An NYSE spokesman wouldn’t comment on IndyMac specifically, citing exchange policy.
Stocks in IndyMac’s price range normally end up in the over-the-counter market, where they’re of interest only to hard-core speculators and day traders.
Photo: Nick Ut / Associated Press
Sen. Charles E. Schumer publicly taunted bank regulators last week about IndyMac Bancorp's financial condition, which helped trigger a sudden outflow of deposits from the Pasadena thrift. Now the New York Democrat is getting some harsh blowback from one current and one former regulator.
Their message, distilled: Zip it, Chuck.
As noted here on Monday, Schumer sent letters to the Office of Thrift Supervision, the Federal Deposit Insurance Corp. and the Federal Home Loan Bank of San Francisco, saying he was "concerned that IndyMac's financial deterioration poses significant risks to both taxpayers and borrowers."
 IndyMac, which has suffered huge losses on defaulted mortgage loans, "could face a failure if prescriptive measures are not taken quickly," Schumer wrote.
Uh, wait a minute -- how could Schumer know that? And since when are regulators supposed to tell the public in advance that a particular institution has been earmarked for possible failure? All that would do is guarantee a collapse. If depositors are within FDIC insurance limits they have nothing to worry about, anyway.
That pretty much sums up the content of a letter to Schumer today from John M. Reich, director of the Office of Thrift Supervision.
"As a regulator of insured depository institutions, we do not publicly comment on the financial condition or supervisory activities related to open and operating institutions," Reich wrote. "We believe it is critically important to maintain the confidentiality of examination and supervision information."
He went on: "Dissemination of incomplete or erroneous information can erode public confidence, mislead depositors and investors, and cause unintended consequences, including depositor runs and panic stock trades. Rumors and innuendo cause damage to financial institutions that might not occur otherwise and these concerns drive our strict policy of privacy."
John D. Hawke, the U.S. comptroller of the currency (regulator of national banks) from 1998 to 2004, had more pointed words for Schumer in a story in the American Banker newspaper today.
"If Schumer continues to go public with letters raising questions about the condition of individual institutions, he will cause havoc in the banking system," Hawke said.
"Leaking his IndyMac letter to the press was reckless and grossly irresponsible. I don't see how he can be trusted with confidential information in the future. What this incredibly stupid conduct does is put at risk the willingness of regulators to share any information with the [congressional] oversight committees. After this, you'd be crazy to share information with Schumer."
The senator's office didn't respond to a request for comment today. On Monday, Schumer aide Brian Fallon offered this explanation for Schumer's action: "The home loan bank system has an obligation to lend responsibly and police its members. But it has not been doing its job. We have found the only way to get the home loan bank system to act appropriately and positively is to make public the concerns we've already expressed privately."
If that's Schumer's policy on the U.S. financial system's troubles overall, it's going to be a long, hot summer.
Photo: Sen. Charles Schumer. Mark Wilson/Getty Images
Struggling IndyMac Bancorp acknowledged today that it continued to face a larger-than-normal number of depositors looking to pull their funds, after new concerns about the Pasadena lender’s health began to swirl late last week.
"We had continued elevated traffic in the branches today, but by afternoon it was subsiding," said Grove Nichols, IndyMac's director of communications. "Hopefully, the rush is abating."
Meanwhile, Sen. Charles E. Schumer (D-N.Y.), who helped fuel depositors’ concerns about the bank last week, sounded like he was trying to double-back a bit. He told the Associated Press that he had spoken with Treasury Secretary Henry M. Paulson Jr. and with Sheila Bair, chairwoman of the Federal Deposit Insurance Corp., and was "reassured they are on top of the situation."
 IndyMac's depositors "should not worry," he added, given the bank’s FDIC insurance.
Loss-ridden IndyMac has been hammered by mortgage loan losses as defaults have surged over the last year. Its troubles have been well known on Wall Street, where its stock has collapsed this year. (The shares edged up 3 cents to close at 65 cents today.)
But worries that the bank could fold were fanned last week after Schumer sent a letter to the FDIC, the Office of Thrift Supervision and the Federal Home Loan Bank of San Francisco, saying he was "concerned that IndyMac’s financial deterioration poses significant risks to both taxpayers and borrowers."
The letter shocked some Wall Street analysts, who said Schumer was in effect sealing the lender’s fate by raising the prospect of its failure.
As detailed here, IndyMac said Monday that it saw about $100 million of its $19 billion in deposits flow out on Friday and Saturday, as nervous depositors lined up at some of its San Gabriel Valley branches.
Nichols wouldn’t provide figures on the net decline in deposits Monday and Tuesday. "We're not going to update the press on a daily basis on our deposits," he said. Most of the unusual traffic in IndyMac’s branches today was from depositors who were concerned but were reassured after talking to bank employees, he said.
The Times also fielded numerous calls this morning from depositors worried about their IndyMac CDs. Several said they knew their accounts were federally insured, but feared that it would take weeks, months or longer to recover them if the bank shut down.
FDIC officials, however, note that when a bank fails they’re required by law to promptly have checks for insured depositors if another bank doesn't immediately take over the accounts.
From the FDIC website: "It is the FDIC's goal to make deposit insurance payments within one business day of the failure of the insured institution. Typically, a bank that has failed will be closed on a Friday. The FDIC will then work the weekend to complete deposit insurance determinations for most deposits and be prepared on Monday to either transfer the insured portion of a deposit to another FDIC insured institution or provide deposit insurance payment checks."
For more from the FDIC, see this Q&A.
For IndyMac's rebuttal to Schumer's letter and to a report Monday on its lending practices, go here.
Photo: Sen. Charles Schumer. Andrew Harrer / Bloomberg News
UPDATE: Comments from Sen. Schumer's office now are included below.
Pasadena-based mortgage lender IndyMac Bancorp, battling fresh rumors that it is near collapse, conceded today that its financial position "has deteriorated since last quarter," and said it was working on a plan with its regulators to improve "the safety and soundness" of the bank.
The company's statement, put up on its corporate website, follows a weekend that saw depositors line up at some of its San Gabriel Valley branches to pull their money, as they reacted to news reports questioning the company’s survival.
It’s no secret on Wall Street that IndyMac has been ailing in the wake of huge losses on its loan portfolio as borrower defaults surge. The company’s stock price has been hammered down to mere pennies, and the plunge in the shares has accelerated over the last week. They ended at a record low of 62 cents today, down 23% from Friday’s close of 81 cents.
 But depositors may have been spooked by a letter late last week from Sen. Charles E. Schumer (D-N.Y.) to the Federal Deposit Insurance Corp., the Office of Thrift Supervision and the Federal Home Loan Bank of San Francisco, saying he was "concerned that IndyMac’s financial deterioration poses significant risks to both taxpayers and borrowers."
The letter stunned some Wall Street analysts, who said Schumer was in effect sealing the lender’s fate by raising the prospect of its failure. Schumer's response? Don't kill the messenger. “Make no mistake about it: IndyMac’s problems were caused by IndyMac’s management and no one else," Schumer spokesman Brian Fallon said in an email. "The home loan bank system has an obligation to lend responsibly and police its members. But it has not been doing its job. We have found the only way to get the home loan bank system to act appropriately and positively is to make public the concerns we’ve already expressed privately."
In its statement today, IndyMac said that after the Schumer letter appeared in the media, "we did experience elevated customer inquiries and withdrawals in our branch network last Friday and on Saturday of roughly $100 million." IndyMac said that amounted to about 0.5% of its total deposits of $19 billion.
"While branch traffic is somewhat elevated this morning, it is substantially lower than on Saturday," the bank said. It added that more than 96% of its deposits were fully insured by the FDIC (meaning the accounts were within federal insurance limits, and therefore should be safe no matter what happens to the company).
But the final part of IndyMac’s statement sounds more like a plea than a declaration that it will survive: "We are hopeful that this issue appropriately abates soon," the bank said about the deposit outflows, "so that we can focus, with our regulators’ involvement, on the important issue of continuing to keep IndyMac Bank safe and sound through this unprecedented crisis period."
Separately today, the non-profit Center for Responsible Lending published a report slamming IndyMac's lending practices in recent years. Read it here.
Photo: Nick Ut/Associated Press
California and Illinois both filed suit against Countrywide Financial Corp. today, alleging deceptive business practices in the mortgage giant’s lending operations in the last few years.
These cases are likely to be the first of a flood of state suits against Countrywide (soon to be a unit of Bank of America Corp.) for its role in the mortgage boom and bust. But the end result of the legal pile-on is far from clear -- in particular, whether the states’ cases will mean even a penny of help for borrowers who were, in fact, victims.
And how to separate the victims from the greedy borrowers who knew all too well that they were taking out loans they couldn’t afford?
In any case, the California and Illinois allegations will resonate with many people who did business with Countrywide (and with plenty of other lenders in the boom years). They’ll also resonate with people who were responsible borrowers and who were aggravated by Countrywide’s nonstop mail solicitations begging them to borrow more money. Yes, this is America, and you're allowed to market your business. But it's one thing to hawk, say, cable TV services; it's another to help load a family with so much debt that it ruins their lives.
 Here are some of the highlights of the California complaint against Countrywide, Chief Executive Angelo Mozilo and President David Sambol (none of whom is commenting). Note the generic nature of these allegations. This case could really use some meat on these bones:
-- "Defendants viewed borrowers as nothing more than the means for producing more loans, originating loans with little or no regard to borrowers’ long-term ability to afford them and to sustain homeownership. This scheme was created and maintained with the knowledge, approval and ratification of defendants Mozilo and Sambol.
-- "To further the deceptive scheme, defendants created a high-pressure sales environment that propelled its branch managers and loan officers to meet high production goals and close as many loans as they could without regard to borrower ability to repay.
-- "Countrywide received numerous complaints from borrowers claiming that they did not understand their loan terms. Despite these complaints, defendants turned a blind eye to the ongoing deceptive practices engaged in by Countrywide’s loan officers and loan broker ‘business partners,’ as well as to the hardships created for borrowers by its loose underwriting practices.
-- In the case of home-equity lines of credit, or HELOCs, "Countrywide typically urged borrowers to draw down the full line of credit when HELOCs initially funded. This allowed Countrywide to earn as much interest as possible on the HELOCs it kept in its portfolio. For the borrower, however, drawing down the full line of credit at funding meant that there effectively was no ‘equity line’ available during the draw period, as the borrower would be making interest-only payments for five years.
-- "Underwriters were under intense pressure to process and fund as many loans as possible. They were expected to process 60 to 70 loans per day, making careful consideration of borrowers’ financial circumstances and the suitability of the loan product for them nearly impossible.
-- "Because of the intense pressure to produce loans, underwriters increasingly had to justify why they were not approving a loan or granting an exception for unmet underwriting criteria to their supervisors, as well as to dissatisfied loan officers and branch managers who earned commissions based on loan volumes.
-- "Countrywide’s high-pressure sales environment and compensation system encouraged serial refinancing of Countrywide loans. The retail compensation systems created incentives for loan officers to churn the loans of borrowers to whom they had previously sold loans, without regard to a borrower’s ability to repay, and with the consequence of draining equity from borrowers’ homes."
Photo: Countrywide CEO Angelo Mozilo. Credit: Ric Francis / Associated Press
KB Home Corp. may not have seen the U.S. housing crash coming, but it wasn’t going to make the same mistake in Europe.
Now the L.A.-based home builder’s decision to jettison its European operations a year ago is looking pretty smart: Kaufman & Broad SA, the Paris-based builder sold by KB Home, on Thursday suffered its biggest-ever share price decline after reporting a 71% drop in fiscal first-half earnings and slashing its sales forecast for the year.
 Kaufman & Broad’s stock tumbled 17% in Paris to the equivalent of $43 a share.
Looks like they’re reliving America’s housing nightmare in France. Bloomberg quotes Kaufman & Broad’s CEO, Guy Nafilyan, warning that "it is plausible to say that [home] orders in France will probably fall this year by 15% or 20%. It’s a tough market."
He added: "The current slowdown is here to stay, for at least two years. We’re in a cycle and once they are started, cycles don’t end in six months."
Tell us about it, Guy!
Back to KB Home’s move: In May 2007 it agreed to sell its 49% stake in the European builder to buyout firm PAI Partners for 601 million euros, at the time worth $812 million.
KB Home began building homes in Paris in 1968 as a diversification move. But with the U.S. housing market well into implosion mode by last spring, CEO Jeffrey Mezger decided to abandon the Continent after 40 years there and use the sale proceeds to pare debt.
If KB Home still held the Kaufman & Broad stake today it would be worth about half the price Mezger got.
So even though the L.A. company's shares, at $19.06 Thursday, are down 56% from a year ago, there may be some small comfort for shareholders in knowing that things could be even worse.
On this decision, at least, they can say: Touche, Monsieur Mezger.
Photo: The Eiffel Tower
Countrywide Financial Corp.’s demise as an independent business is near.
A Bank of America Corp. spokesman in Charlotte confirmed today that the company could complete its takeover of the loss-ridden mortgage giant by July 1.
Countrywide shareholders are to meet on Wednesday at the firm’s Calabasas headquarters to vote on the deal. (Not that they have any real choice.)
 Once it gets that approval, BofA could complete its stock swap by July 1. That would be the end of Countrywide as run by CEO Angelo Mozilo, who of course has become the personification of the outrageously sleazy lending that fueled the housing market bubble.
It isn’t clear whether July 1 also would be Mozilo’s last official day of work. A call to Countrywide’s media relations line wasn’t returned.
BofA CEO Ken Lewis has said he expected the 69-year-old Mozilo to "stay until the deal gets done, and I would assume he would then want to go have some fun." Maybe taking a computer-learning class?
Given the lightning rod that Mozilo has become, BofA probably wishes he would have departed months ago. But until it gets the stock, the bank can’t officially boot him.
As for Countrywide shareholders, including Mozilo, their payoff in the takeover was never much, relatively speaking -- and it’s getting smaller by the day, as BofA’s stock sinks with the latest blistering sell-off in financial shares in general.
Under terms of the deal, announced in January, BofA will exchange 0.1822 of its shares for each Countrywide share. When the takeover was announced on Jan. 11, BofA shares were at $38.50. That put a value of $7.01 a share on Countrywide.
Today, BofA’s stock fell 23 cents to $28.14, its lowest since 2001. That values Country- wide at $5.13 a share -- 89% below its record high of $45 in February 2007.
Even as the takeover nears completion, Wall Street has continued to price Countrywide stock below the theoretical deal value. The shares ended at $4.83 today on the NYSE. Still, the discount was far wider a few weeks ago when worries kept surfacing that BofA might pull out.
Right now, it looks like a new master is about to take control in Calabasas.
Photo: Countrywide CEO Angelo Mozilo. Ric Francis/Associated Press
The Bush administration and the Federal Reserve are getting what they wanted: a big rally in the dollar and a drop in oil prices.
But the cost is higher interest rates -- great for savers, lousy for home buyers.
The dollar has jumped today to a three-month high of 107.37 yen from 106.10 on Monday, while the euro has fallen to $1.545, down from $1.565 on Monday and from $1.577 on Friday.
 Crude oil was off $3.12 to $131.23 a barrel at about noon PDT, after rising as high as $137.98 early in the session.
Let’s recap the last few days: Oil soared to a record high of $138.54 a barrel on Friday, in part because the dollar slid and the stock market dived after a disturbingly weak U.S. employment report for May.
Here's the widespread view on Wall Street: The administration and the Fed looked around for a way to help pull oil back down, and they decided to focus on the dollar. If they can boost the greenback’s value they might reduce global investors’ and speculators' appetite for commodities, which have been rallying in part because a weak dollar makes commodities look more appealing than other dollar-denominated assets.
 So early on Monday Treasury Secretary Henry M. Paulson Jr. tells CNBC that the administration won’t rule out jumping into the currency market to boost the dollar.
Fed Chairman Ben S. Bernanke follows that with a speech Monday evening in which he basically says the economy will be OK, and the Fed is more worried about inflation. The hint therein: The Fed’s next step with interest rates is more likely to be an increase than a cut.
Today, yields on Treasury bonds are surging on Bernanke’s warning. The two-year T-note yield was at 2.90% at about noon PDT, up from 2.71% on Monday and 2.38% on Friday. That’s a massive move in two days.
And as U.S. bond yields rise, that underpins the dollar’s value by making bonds more attractive to global investors.
"What Bernanke has done to U.S. yields has given the dollar a lot more support than anything else he could have said," said Daniel Katzive, a foreign exchange strategist at Credit Suisse in New York.
But rising bond yields will put upward pressure on mortgage rates, too -- which is about the last thing the crippled housing market needs.
Wall Street ought to know better than most: There is no free lunch.
Photos: Treasury Secretary Henry M. Paulson Jr. (Karen Bleier/AFP/Getty Images) and Fed Chairman Ben S. Bernanke (Susan Walsh/Associated Press)
Yes, you have gotten poorer. And at an accelerated pace.
The net worth of U.S. households fell in the first quarter, the second straight decline, thanks to the double-whammy of sliding home values and the plunge in stock prices, the Federal Reserve said in a report today.
The central bank’s so-called flow of funds report estimated the net worth of American households at $55.97 trillion as of March 31, down $1.7 trillion, or 2.9%, from year-end. That was more than three times the $530-billion drop in the fourth quarter.
Home values fell by $329 billion in the first quarter after a $196-billion drop in the fourth quarter.
But it was the slump in stocks that really hammered Americans’ net worth: The value of their stock accounts and mutual funds sank by $956 billion in the first quarter, after a $598-billion decline in the previous quarter. (The market has recovered quite a bit since, of course.)
Still, at least by the Fed’s estimation, Americans’ overall balance sheet remains quite healthy. Net worth, remember, is assets minus liabilities. Households’ assets, at $70.46 trillion, dwarf their liabilities of $14.49 trillion, which mainly consist of mortgage and consumer debt.
What the totals don't show, however, is how net worth is distributed. A huge chunk of it is in the hands of the wealthiest people. Down the income chain there have to be plenty of people with negative net worth, especially in light of the housing bust.
Some minor encouraging news in the Fed’s report: Households continued to build up cash savings, which reached $7.59 trillion at the end of March, up from $7.08 trillion at the end of the third quarter.
On the other hand, as every saver knows, you’re earning next-to-nothing on cash accounts now, thanks to the Fed’s interest-rate cuts.
There is one ugly conclusion to be drawn from the first-quarter numbers out today on mortgage delinquencies and foreclosures: There will be a lot more homes coming on the market, especially in the Golden State.
Home builders’ stocks look like they’re reflecting that cold reality. Shares of KB Home, Ryland Group and others are mostly lower even as the broader market is rallying.
As expected, the delinquency and foreclosure data from the Mortgage Bankers Assn. showed things got significantly worse in the first quarter.  The national delinquency rate, meaning the percentage of home loans 30 days or more past due on payments, jumped to 6.35% (seasonally adjusted) as of March 31 from 5.82% at the end of the fourth quarter.
Breaking that down, the national delinquency rate was 18.8% for sub-prime loans as of March 31 compared with 17.3% as of Dec. 31. For prime loans the rate rose to 3.71% from 3.24%.
California actually ranked below the national averages on delinquencies. A total of 16.9% of sub-prime loans in California were delinquent at the end of the first quarter, down from 18% in the fourth quarter.
The prime-loan delinquency rate for California was 3.52%, up modestly from 3.43% in the fourth quarter.
But Jay Brinkmann, research chief at the mortgage bankers' group, says the problem in California is that delinquent loans have less of a chance of being cured than in other parts of the country because of the severity of the home price declines here. In other words, delinquencies are more likely to turn into foreclosures in the Golden State.
The first-quarter data bear that out: The percentage of the state’s prime loans in foreclosure soared to 1.49% as of March 31 from 1% three months earlier.
The national prime-loan foreclosure figures, for comparison: 1.22% as of March 31, up from 0.96% in the fourth quarter.
For sub-prime loans, the state’s foreclosure percentage surged to 14.6% from 10.6% at the end of last year, compared with national rates of 10.74% and 8.65%.
The foreclosure data overall suggest "a flood of homes back on to the resale market," worsening the outlook for prices, Merrill Lynch & Co. economists warned in a note today.
Shares of home builders are taking the hint. The Standard & Poor’s index of 15 major builders’ stocks was off about 2.3% at noon PDT to its lowest since March.
Photo: A foreclosed home in Egg Harbor Township, N.J. Mel Evans/Associated Press
What about the other Ken in Charlotte?
After Wachovia Corp.'s board today ousted CEO Ken Thompson from the bank's helm, some on Wall Street turned their attention to Wachovia’s arch-rival in Charlotte: Bank of America Corp.
 BofA CEO Ken Lewis is battling skeptics who worry that his agreement this year to buy Calabasas-based mortgage lender Countrywide Financial Corp. could be as ill-fated as Wachovia’s deal for Golden West Financial, another mortgage titan, in 2006.
BofA shares have fallen for four straight months and lost 1.3% today to close at $33.58, a five-year low. The stock's annualized dividend yield now is a lofty 7.6%, a sure sign that the market believes the payout will be reduced. Wachovia's 41% dividend cut in April was one of the factors building up to Thompson’s removal.
I wrote here on May 22 about some of the issues dogging BofA, including doubts about the Countrywide purchase given the continuing surge in mortgage delinquencies. On a lengthy conference call with analysts today, Lewis again defended the stock-swap deal, announced in January.
As for the timing of the deal, "It certainly would be hard to make the case that it is the top of the market, but obviously you wonder -- the concern would be that you've still got dramatic ways to go before you get to the bottom," Lewis said. "We did not, at the time we announced the deal, think that the market had bottomed in terms of housing. We expected further deterioration, as has happened.
"Secondly, we've been told consistently even by the regulators that people think they’re very good operators," Lewis said, referring to Countrywide. "They know what they are doing. Now, they blew it on the credit side, obviously, but that wasn’t the operators' problems. That was the orders they were given."
The orders they were given? Wonder what Countrywide founder Angelo Mozilo would say about that?
Back to Lewis: If BofA is "in the ballpark" on the true value of Countrywide’s loan portfolio, he said, "this could be a very compelling financial transaction."
Obviously, Ken Thompson picked the market peak to swallow Golden West. Ken Lewis bought Countrywide in a fire sale. But even in a fire sale, you can’t always be sure you got a bargain until well after the fact.
Photo: BofA CEO Ken Lewis. Lawrence K. Ho/Los Angeles Times
Some perspective on the economy, with a little bit of levity salted in, from the latest weekly commentary of veteran economist Edward Yardeni of Yardeni Research Inc.:
"A recession or a banana? In the 19th century, downturns were usually called depressions. However, the term got a bad name in the 1930s and ‘recession’ was coined. Alfred Kahn, one of Jimmy Carter’s economic advisers, was once rebuked by the president for scaring people by talking of looming recession. Mr. Kahn, in his next speech, substituted the word banana for recession.
"Now economists (including yours truly) are talking about a saucer-shaped recession, i.e., a modest downturn followed by a modest recovery. This doesn’t exactly jibe with the 9,000 drop in initial unemployment claims to 365,000 during the week of May 17 [update for the week ended May 24: a slight rise to 372,000]. Readings over 400,000 are usually associated with recessions.
"Several economists, who say we are in a recession, concede that real GDP might not fall for two consecutive quarters. So maybe the economy is in a banana, rather than a recession?
"On the other hand, the number of people continuing to receive unemployment benefits was unchanged at a four-year high of 3.073 million during the week ending May 10 [updated figure for May 17 week: 3.1 million]. It may be that while firings remain subdued, job opportunities are dwindling as employers impose hiring freezes. It may also be tougher for the unemployed to obtain jobs by moving elsewhere because they can’t sell their homes without taking a big loss."
The hefty capital infusion announced today for battered home builder Standard Pacific Corp. was a surprise to Wall Street -- and a particularly nasty surprise to short-sellers who have been betting that the Irvine-based company was headed for bankruptcy.
Standard Pacific’s shares surged $1.07, or 48%, to $3.29 after New York private-equity firm MatlinPatterson Global Advisers agreed to pump $530 million into the firm.
The action in the stock had a "short-covering" feel to it: buying by bearish traders who had previously borrowed shares and sold them, hoping the price would drop. If their bet was correct they could replace the loaned stock at a lower price and pocket the difference. With a white knight now in Standard Pacific's camp, it looks like some of the shorts were scrambling to exit their trades today.
 Short-sellers have had the home builder in their sights for the last year as the company’s earnings have dwindled and its debt problems have mounted. The number of Standard Pacific shares sold short ballooned from 17 million in May 2007 to 47 million by mid-January. And the shorts had it right: In the same period the stock plunged from $21.32 to as low as $2.06.
As the stock recovered a bit in winter some short-sellers cashed out of their bearish bets, trimming the number of shorted shares to 36.6 million by April 30.
But the bears jumped on the company again this month, boosting the shorted total to 43 million shares by May 15 -- more than half the shares outstanding. That looked smart as the stock sank from $5.06 on April 30 to $2.22 on Friday. It didn’t look quite so smart today as MatlinPatterson rode in.
The rescuer, a well-known investor in distressed companies, is buying preferred stock convertible into common shares. That will substantially dilute current investors, so Standard Pacific will have to call a shareholder meeting for approval of the deal.
Given its need for cash, "This probably was the company's only choice," wrote Vicki Bryan, senior high-yield analyst at Gimme Credit, an independent research service on corporate bonds, in a report today. She noted that Standard Pacific has had to negotiate with its lenders to avoid falling into technical default on its loans.
David Matlin, CEO of MatlinPatterson, said in a statement that the builder was a "strong franchise [that] is well-positioned for renewed profitability and success as conditions improve."
That wasn’t what the shorts wanted to hear.
From Times staff writer Walter Hamilton:
The national housing obsession in recent years may have dulled the urge to invest in 401(k) retirement plans.
After expanding strongly throughout the 1990s, participation in 401(k) and other employee-funded retirement plans has grown more slowly in recent years, according to data released today by a Washington-based research group. (PDF of report highlights.)
The number of people investing in 401(k) and similar plans climbed from 42.2 million in 1995 to 50.9 million in 2000, the Employee Benefit Research Institute said. From there, though, participation rose only to 52.2 million through 2004, the institute said.
There are several reasons for that, including fewer small companies offering plans and lingering investor concerns about the stock market after the bursting of the technology bubble in 2000, said Craig Copeland, author of the study.
But the preoccupation with housing played a role, Copeland said, as some people earmarked cash for new or remodeled dwellings as home prices surged instead of funding retirement accounts.
People considered housing to be "the big investment," he said.
Of course, for some people, their home is their retirement plan. But with prices now sliding, the long-term payoff may be a lot less certain.
As for 401(k) plans, the mean annual contribution amount inched up from $4,607 in 2001 to $4,993 in 2005, according to the study.
Plan participation rates are likely to pick up in coming years because the government has given companies legal clearance to automatically enroll workers in 401(k)s.
Nevertheless, the study showed that many people still fail to put enough emphasis of retirement saving, Copeland said. "It shows that people aren't getting the message that they're going to have to do more to plan for their retirement," he said.
On a good day for most financial stocks, IndyMac Bancorp shares finished at a new 18-year closing low after the company’s first-quarter loss report and conference call with analysts -- despite CEO Michael Perry’s continuing efforts to paint the Pasadena-based mortgage lender as a survivor.
The stock slid 37 cents to $3.06, below the previous closing low of $3.25 on April 30.
 Frustrated investors in the stock may be tempted to blame short sellers -- traders who borrow stock and sell it, betting on falling prices. The shorts have targeted IndyMac over the last year, and they may be jumping on it again. But if so, that would be a switch from the last few months: The total number of shorted shares was 34.8 million as of April 30, down from 41.9 million at the end of February, according to New York Stock Exchange data. Looks like the shorts have been getting bored with this one.
Some analysts have raised questions about losses the company could face on now-troubled loans it previously sold to investors, if those buyers try to renege by arguing that IndyMac failed to properly vet the loans.
Perry, asked about put-backs on today’s conference call with analysts, said he expected them to increase. "You know, clearly it is one of those environments where you don’t know for certain how that’s all going to work its way out. You are going to have investors trying to ask you to repurchase more loans. I mean, that is just the way it is," he said.
He also indicated that IndyMac would go to the mat with investors. The loan-evaluation team for potential put-backs is headed by Richard Wohl, the bank’s president and "a Harvard lawyer," Perry reminded analysts. "They have got a strong team in that area really looking through each one of these loans, making sure the reason that the loss has been incurred is something that we did wrong as opposed to the housing market just declining."
Of course, it's likely the investors employ some Harvard-educated lawyers as well.
Photo: Nick Ut/Associated Press
Wall Street’s reaction to quarterly financial reports from home builder Standard Pacific Corp. and mortgage lender IndyMac Bancorp this morning: Sell first, ask questions later.
Shares of Irvine-based Standard Pacific slid as low as $2.72 from $3.77 on Friday after the firm said its first-quarter loss ballooned to $216 million, or $3.34 a share, far exceeding analysts’ estimates. Read the report here. The company also said it’s working with its lenders to extend an easing of restrictions on its finances and hopes to have a final agreement by Wednesday.
The average home sale price across all of Standard Pacific’s markets was $347,000 in the quarter, down 10% from a year earlier, because of "the level of incentives and discounts and price-cutting required to sell homes," the company said.
By contrast, the average selling price was $406,000 in the fourth quarter, down 3% from a year earlier.
Pasadena-based IndyMac's shares fell as low as $3.08, from $3.43 on Friday, after the company said it lost $184 million, or $2.27 a share, in the quarter, also worse than analysts had expected. The report is here.
Although IndyMac reiterated its recent forecast that losses should grow smaller as the year progresses, CEO Michael Perry warned that "we do not expect that IndyMac will be able to return to overall profitability until the current decline in home prices decelerates."
Based on Standard Pacific’s selling experience, the hoped-for "deceleration" of price declines still looks to be somewhere on the far horizon.
IndyMac Bancorp CEO Michael Perry came out swinging today against Wall Street’s increasingly dim view of the mortgage lender’s future, and that has given the stock a pop.
In a filing with the Securities and Exchange Commission, the Pasadena-based company first delivered some bad news: Its chief financial officer, Scott Keys, is taking a medical leave of absence. Perry said Keys’ departure "clearly presents us with some logistic challenges" ahead of the company’s plan to report first-quarter results on May 12. But he said the company would meet that reporting date.
 Included in the filing was a defense of IndyMac’s financial health in the wake of the plunge in its shares to 18-year lows this month. "Given the decline in our stock price, some people have questioned Indymac’s survivability in the current environment," Perry said. "I am here to tell you that I believe we have turned a corner and that our business is improving."
He said the company’s first-quarter loss would be down "roughly 50% to 65%" from the fourth-quarter loss, and that "our forecasts show continued declines in credit costs and in our overall losses each quarter for the remainder of the year."
IndyMac has shifted away from its previous bread-and-butter -- so-called alt-A loans -- to loans it can sell to government agencies. "We are now achieving profitability with this new production model, with all of our 9 regional wholesale centers and 104 of our 152 retail lending branches being profitable in March," Perry said.
Like many lenders, IndyMac sold many of its worst loans to Wall Street. And the bank has set aside significant reserves to cover losses on loans it holds or loans that investors force back to it. The question is whether those reserves will be enough, given the housing market’s continuing slide.
Analyst Eric Wasserstrom at brokerage UBS said in a note to clients today that he still doesn’t believe IndyMac will be profitable in 2008, "as we expect that credit will continue to deteriorate at an accelerated rate, necessitating additional reserving and impairment charges."
Perry is insisting the bank has ample capital and will get through this. The stock market has had severe doubts, but today the shares are getting a bounce, up 77 cents, or 24%, to $4.02 at about 12:40 p.m. PDT, in very active trading. Given the heavy short-selling of the stock, some of those bears may be covering their positions today.
Photo: IndyMac CEO Michael Perry
Posted May 1, 2008
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