Paulson Among Buyers of Failed IndyMac Bank

The FDIC issued a news release Friday to let the world know the agency’s board had approved a letter of intent to sell IndyMac Bank to a thrift holding company controlled by IMB Management Holdings LP.  Though one of the men involved in purchasing the bank shares the same last name as Treasury Secretary Henry M. Paulson, members of the mainstream news media have failed to acknowledge that fact.

A Los Angeles Times report Saturday listed John Paulson as one of two hedge-fund operators (the other being billionaire George Soros) among a small group of owner-investors, while an article published Friday in the San Jose Business Journal noted that the limited partnership includes John Alfred Paulson, the same man.  Neither article, however, deemed it worthwhile to report that the man involved in purchasing a large failed bank shared the same last name as the man who oversees the nation’s banking system, Secretary Paulson.

Noticing that, I decided to see if any other news outlets had seen fit to address the nagging question, “Is John Alfred Paulson related to Henry M. Paulson?” After all, even the pseudo-journalists behind the desk at ESPN Sports Center know enough to toss in an occasional “No relation” upon noticing that two unrelated players who share the same last name.

Surprising me again, none of the articles I found — neither the above-mentioned articles nor others published in the Wall Street Journal Jan. 5, at Bloomberg.com Jan. 3 and via Associated Press Jan. 3 — addressed the question.  That’s when I decided to ask people who should know.

I called IMB’s corporate offices early this afternoon and was told to send an e-mail inquiry to Armel Leslie at Walek & Associates, IMB’s Madison Avenue public relations counsel.  Twice given the opportunity to respond to the question, “Is John Alfred Paulson related in any way to Secretary of the Treasury Henry M. Paulson?” the PR specialist responded by e-mail as follows:  “No relation” and “Yes, no relation.”

Though I had an answer, I was not yet convinced; therefore, I called the Treasury Department Public Affairs Office in Washington, D.C., and asked them to field a nearly-identical question, “Does Secretary Paulson have any immediate relatives by the name of John Alfred Paulson?”

With true bureaucratic efficiency, the buck was passed at least twice during my phone call before I was dispatched with a promise that someone would call me back with the answer.  Unfortunately, that was almost five hours ago.

Is John Alfred Paulson related to Henry M. Paulson? Perhaps not, but that’s not what motivated me to write this article.  Instead, my chief concern was the news media’s seemingly-collective decision to ignore any possible connection between the men.  That kind of collusion, I fear, might portend a much greater problem for our nation’s future than banking failures.

BANK FAILURE! IndyMac Bank Closed by FDIC

Below is the text of an FDIC news release about today’s collapse of IndyMac Bank:

IndyMac Bank, F.S.B., Pasadena, CA, was closed today by the Office of Thrift Supervision. The Federal Deposit Insurance Corporation (FDIC) was named conservator. The FDIC will transfer insured deposits and substantially all the assets of IndyMac Bank, F.S.B., Pasadena, CA, to IndyMac Federal Bank, FSB. Brokered deposits will be held by the FDIC and those insured deposits will be paid off when the insurance determination is complete. IndyMac Bank, FSB had total assets of $32.01 billion and total deposits of $19.06 billion as of March 31, 2008. As conservator, the FDIC will operate IndyMac Federal Bank, FSB to maximize the value of the institution for a future sale and to maintain banking services in the communities formerly served by IndyMac Bank, F.S.B.

Insured depositors and borrowers will automatically become customers of IndyMac Federal, FSB and will continue to have uninterrupted customer service and access to their funds by ATM, debit cards and writing checks in the same manner as before. Depositors of IndyMac Federal Bank, FSB will have no access to on-line and phone banking services this weekend. These services will be operational again on Monday. Loan customers should continue making loan payments as usual.

Beginning on Monday, July 14, IndyMac Federal Bank, FSB’s 33 branches will observe normal operating hours and will continue to offer full banking services, including on-line banking. For additional information, the FDIC has established a toll-free number for customers of IndyMac Federal Bank, FSB. The toll-free number is 1-866-806-5919 and will operate today from 3:00 p.m. to 9:00 p.m. (PDT), and then daily from 8:00 a.m. to 8:00 p.m. thereafter, except Sunday, July 13, when the hours will be 8:00 a.m. to 6:00 p.m. Customers also may visit the FDIC web site at www.fdic.gov/bank/individual/failed/IndyMac.html for further information.

At the time of closing, IndyMac Bank, F.S.B. had about $1 billion of potentially uninsured deposits held by approximately 10,000 depositors. The FDIC will begin contacting customers with uninsured deposits to arrange an appointment with an FDIC claims agent by Monday. Customers can contact the FDIC for an appointment using the toll-free number above. The FDIC will pay uninsured depositors an advance dividend equal to 50 percent of the uninsured amount.

Based on preliminary analysis, the estimated cost of the resolution to the Deposit Insurance Fund is between $4 and $8 billion. IndyMac Bank, F.S.B. is the fifth FDIC-insured failure of the year. The last FDIC-insured failure in California was the Southern Pacific Bank, Torrance, on February 7, 2003.

Congress created the Federal Deposit Insurance Corporation in 1933 to restore public confidence in the nation’s banking system. The FDIC insures deposits at the nation’s 8,494 banks and savings associations and it promotes the safety and soundness of these institutions by identifying, monitoring and addressing risks to which they are exposed.

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See also: IndyMac Bank 33rd to Fail Since October 2000 (7-12-08)

News coverage: Bloomberg, SmartMoney, United Press International