Friday, July 11, 2008

Bank Runs, Federal Seizure, Mortgage Meltdown? This is America?

The big news in the business world today was the fed’s seizure of IndyMac Bank, due to a recent run on holdings by depositors. It’s not everyday you get to see a good old fashioned bank run. When was the last one? Back in the depression? Oh, I forgot, we’re in a depression, more politically correctly known as a mild recession by this administration’s White House spinsters.

What was that I heard last week the government was going to do for homeowners? Oh yeah, the Senate passed a housing bill.

Under the Senate bill, the FHA could insure up to $300 billion in new 30-year fixed rate mortgages for at-risk borrowers in owner-occupied homes if their lenders agree to write down their loan balances to 90% of the current appraised value of their homes.

So why did IndyMac fail? At-risk borrowers.

Sort of a band aid for a slit throat? What geniuses in our government come up with this stuff? Economy experts? How about White House P.R. guys?

I worked at IndyMac bank as a computer programmer until two years ago. I can tell you it was a very politically charged environment. Though many companies are. But IndyMac was especially a network of people who hired friends and gave out favors. My Information Technology head was the company president’s good buddy from college, who admitted he knew nothing about technology, nor even mortgage lending. But his old roommate called him in and taught him everything he needed to know in just a few hours. Impressive, isn’t it? Either this guy was a genius who could pick up all the knowledge anyone could ever need to be a bank vice president in a few hours, or he was full of crap and his true expertise was being a bullshit artist.

I actually walked into his office and asked him to address a personal situation I had with my supervisor and co-workers who couldn’t understand why I wouldn’t conform to my department’s standard policies in writing programs. The fact that there was no standard, written or otherwise didn’t seem to be of consequence. Their take was that I should just look at the code of my coworkers and use that as a standard. I guess they didn’t put much stock into all the Microsoft white papers on what’s well known in the industry as best practices, which are the standards I’ve always tried to follow.

Anyway his response was that at IndyMac they don’t try to fit a square peg into a round hole, but they do expect you to take that square peg and make it roll. I swear that was exactly what this guy told me. Make the square peg roll. That was what had been working for IndyMac all these years and that was what they wanted from their employees. So much for rolling square pegs. I think it was the cave men that came up with this new wheel concept, a little too late for IndyMac Bank, I guess.

If this is any indication of the rest of the banking industry, we’re in deep trouble.

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