The cover story for the April 25 Indypendent featured Simeon Ferguson, an 86-year-old Crown Heights man suffering from dementia who had been saddled in 2006 with a $450,000 option adjustable rate mortgage (ARM ) that was fairly guaranteed to put his house in foreclosure. It was the kind of deal his bank—IndyMac—specialized in: highly profitable loans for which home buyers were asked to produce little or no evidence of income or assets other than the house they were buying. The main targets of these practices were black seniors at risk of being stripped of decades worth of hard-earned home equity.

On Friday, Indy Mac’s karma caught up with it as one of the subprime mortgage crisis’s main instigators was consumed by its own folly. With Indy Mac’s stock price down by more than 95 percent, large second quarter losses anticipated and depositors rapidly drawing down its reserves, federal regulators had no choice but to shut down the $32 billion bank. The final cost to taxpayers is currently projected to be $4-8 billion.

Of course, at the height of the housing bubble, Indy Mac’s business model seemed like a great idea. As cnn.com notes, “If a buyer wasn’t able to afford his payments, the bank got title to a home worth more than the amount owed. The bank was also able to find investors eager to buy pools of those mortgages that had been pulled together into securities backed by the future payments.

“But when the housing bubble burst and prices began to fall, losses at IndyMac began to rise. Investors ran away from the mortgage-backed securities, leaving the bank to suffer the loan losses itself and without the funding it needed to make new, safer loans.”

The bank reopens Monday with a new charter and a new name — IndyMac Federal Bank. The Federal Deposit Insurance Corporation (FDIC) will try to sell it as a complete entity within 90 days.
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Another Indy update: In the June 6 Indypendent, we ran a feature story from Jordan Flaherty on Angola, Louisiana’s notorious prison plantation where 85 percent of the population is expected to die behind its walls and where hundreds of inmates have been kept in solitary confinement for decades. On July 8, one of Angola’s most well-known residents, former Black Panther Albert Woodfox, had his conviction in the 1972 killing of a prison guard overturned by a federal court. Woodfox and Herman Wallace spent 35 years in solitary confinement for their alleged crime before being returned to the general population this spring. Similar appeals are being developed on Wallace’s behalf. Meanwhile, Louisiana Attorney General Buddy Caldwell says he will appeal the ruling to the 5th Circuit Court of Appeals. For more information, click here.