IndyMac's bargain price

The folks at Breakingviews.com have been tearing apart the deal that has a group of investors buying the failed Pasadena thrift for $13.9 billion. The sweetheart sale includes assumed liabilities for IndyMac’s $16 billion loan portfolio, $6.9 billion of securities, and two mortgage servicing platforms. That suggests a huge discount on the loans and securities, according to Lauren Silva Laughlin.

But the discount on those assets is probably even greater. Last March, the investor Wilbur Ross bought Option One, which has a mortgage servicing business about a third the size of IndyMac’s, for $1.1 billion. Extrapolate that to IndyMac’s servicing business as a rough comparison, and it implies a value of roughly $3 billion. That would mean the private equity buyers are paying about $11 billion for IndyMac’s loans and securities, or about a 55 percent discount from face value. Depending on the details of the assets, even in a dire market that could be a bargain.

Here's another big break: IndyMac’s buyers will bear the first 20 percent of any future write-downs on about $13 billion of the loans. But after that, it's the feds who wind up with most of the losses, which will be considerable.

The F.D.I.C. says the deal allows it to rid itself of hard-to-sell assets, including IndyMac’s portfolio of troublesome Alt-A mortgages. The agency had already sunk about $9 billion from its insurance fund into IndyMac, so while it did shop the bank to a range of possible buyers, it may have understandably been in a hurry to return it to private hands. Perhaps that justifies some of F.D.I.C.’s concessions. But assuming no one steps in with a better offer this time, the agency should aim to strike a harder bargain next time.