The Wall Street Journal asks the question (subscription required) "Is the government charging too little for the remains of failed mortgage lender IndyMac?"

The FDIC sold the corpse of IndyMac to a consortium of hedge funds run by a slew of highly-respected investors. The deal even includes a loss-sharing agreement.

The specifics of the deal are admittedly far beyond my understanding, but here's my questions: The Treasury has spent hundreds of millions of dollars buying "bad assets" from various banks -- why didn't these brilliant hedge fund managers go and outbid the Treasury for those assets instead of buying IndyMac from the FDIC?

Presumably, they think this represents a better opportunity. Our federal government is currently buying assets that private investors don't want while selling them stuff that they do. And who gets to decide what to sell and what to buy? Not the federal government!

Something tells me the taxpayer will be the one who gets screwed. But that's nothing new.

Trading Strategies for January
So 2008 has ended, but that alone won't make investing any easier. From bear-market rally tips, to hedging the Obama effect, to a pure play on the Baltic Dry Index, MarketWatch experts have ideas about starting over in 2009.
http://www.marketwatch.com/newscommentary/tradingstrategies

The Best of Madoff Memorabilia
Like Enron, Bear Stearns and Lehman Brothers after those firms met their ends, memorabilia identified with Bernie Madoff is on eBay.
http://www.cnbc.com/id/28470404

Confidence in the global economy fell in September, as concern mounted about the health of the U.S. economy and global financial system following the bankruptcy of Lehman Brothers and the near bankruptcy of AIG, which prompted a U.S. Federal Reserve intervention, a new survey indicated.

The Bloomberg Professional Global Confidence Index fell to 11.3 in September from 14.1 in August among U.S. respondents. The Western European index fell to 12.6 from 12.9. Readings below 50 indicate negative sentiment.

Economist Richard Felson, who did not participate in the Bloomberg survey of 3,000 Bloomberg Terminal users, told BloggingStocks Wednesday too many financial concerns and bankruptcies are occurring over a short period for business professionals to be positive.

"Countrywide, Bear Stearns, Indymac, Freddie, Fannie, Lehman, Merrill, and now AIG. Wow, that's an awful lot for any economic system to absorb in five years, let alone one year," Felson said. "Executives and other business professionals are justifiably concerned about credit access for business operations and about declining demand due to rising unemployment. The major U.S. economic metrics are not moving in a positive direction right now and the nation needs to correct that."

In the News:

Your Money: McCain vs. Obama
See where the presidential candidates stand on the major economic issues like gas prices, taxes, mortgage crisis, jobs, health crisis and more.
Your Money: McCain vs. Obama - CNNMoney.com

If Only Martha Stewart Was a Little More Patient
If they only had been more patient investors of ImClone Systems, Martha Stewart and others might have done just fine, and avoided jail time. In a strange twist, ImClone -- the biotechnology company whose stock was dumped just before bad news was announced about an experimental cancer drug -- has received a multibillion-dollar takeover bid pegged to the success of that very same drug.
Once Dumped, ImClone Soars - NYTimes.com

As a sign of how disconnected one can be, I had to ask my 12-year old about Steve & Barry's. I had not heard of it and it is receiving way too many comments on our site to be ignored. My colleague Zac Bissonnette started blogging about it a month ago Steve & Barry's on the brink of bankruptcy? and the comments are still coming in strong as the story progressed.

Steve & Barry's filed for Chapter 11 bankruptcy on July 9, 2008, and information about its status and answers to frequently asked questions can be found here.

The company has been expanding rapidly and clearly hit a brick wall with consumer budgets severely strained and the economy facing uncertainty in the short term. However, this is supposed to be a discount chain. Perhaps the discounting amounted to selling dollars for ninety cents, and it could not make it up on volume.

This is a relatively small company, but clearly it matters to a lot of people. The number of comments we have received has surpassed most of our recent stories, even those of the Bear Stearns takeover (acquired by JPMorgan Chase (NYSE: JPM)) and the IndyMac (NYSE: IDMC) collapse.

Steve & Barry's might have had an IPO sometime in its future, but that is not likely in the current environment. What is it that makes this story so compelling to our readers? If it is because the stores are so great, what went wrong in your neighborhood?

Sheldon Liber is the CEO of a small private investment company and the principal for design and research at an architecture & planning firm. He writes the columns Chasing Value and Serious Money. Disclosure: I own shares of any of JPM.

Last week, our country suffered its second biggest bank failure in history. But since it was an FDIC insured institution, this means that depositors had nothing to worry about as long as they had less than $100,000 in each account, right?

Well, that's what I thought when I heard that $32 billion IndyMac had failed. But a commenter on my Auction Rate Securities (ARS) post -- which now has 5,235 comments from people whose money is frozen -- told a chilling story with implications for everyone who keeps money at a bank.

As he said, "I've spent the past 3 days waiting outside an IndyMac branch. it was utter chaos. some people had funds that mysteriously disappeared from the IndyMac computer logs. (under 100 grand). bumbling FDIC officials, depositors fighting, people passing out from the heat, elderly folks collapsing when they realize their life savings were not insured...and even those who had under 100 grand are having some difficulty getting other institutions to accept the IndyMac checks."

If you have deposits in a bank that looks like it's in trouble, get your money out before the FDIC takes it over. Do you really want to spend three days waiting in line to access your cash? As the commenter advised: "While you may be within the insured limits at your bank, like i was, you still want to avoid banks that are in trouble. It's not worth the hassle."

Peter Cohan is President of Peter S. Cohan & Associates. He also teaches management at Babson College and edits The Cohan Letter. He has no financial interest in the securities mentioned.

When Countrywide fell apart, the government moved in and began to examine the company's loan practices for fraud. Perhaps history is repeating itself. The FBI has set up an office at IndyMac (OTC: IDMC) to investigate whether its loan practices were above board.

According to The Wall Street Journal, "Failed lender IndyMac Bank is among nearly two dozen banks under scrutiny by the Federal Bureau of Investigation for possible mortgage fraud." Both the media and the bank were thin on details, very thin.

The matter, and questions at Countrywide, raise the issue of where regulators were when these firms operating as normal, standalone businesses making hundreds of thousand of home loans each year. Consumers are not terribly well-served if the FBI or any other government agency gets into the act once all of the damage has been done.

If the FBI finds any wrong-doing, what then? Is there a way to make reparations to people who may have lost their home or paid mortgage rates and additional fees which were much too high? Management at some of these lending operations may get into trouble, but the victims are unlikely to be helped.

Douglas A. McIntyre is an editor at 247wallst.com.

Yesterday's Major League All-Star Game went into extra innings (15 total) before the American League won 4 to 3, earning the home field advantage when the World Series rolls around in October. Yesterday was also the day I called the bottom of our economic woes (see Will Bush throw a change-up at Yankee Stadium?).

Calling the bottom should not be confused with the end of the pain. It could get worse but I see signs of the turn, and today the market, for the moment, is up. Oil prices are down, as I write, to $132 per barrel and I do not think we will be seeing $200 oil any time soon, as some have opined.

Today's Wells Fargo (NYSE: WFC) earnings report set things off in the right direction. Wells Fargo: Beating expectations by my colleague Steven Halpern will give you the details, but the highlights are lower earnings, a 10% increase in the dividend yield, and a tolerable and understandable charge for bad loans and to increase reserves.

If Bush's change-up marks the bottom, then WFC is the slugger that hit the ball back over the fence. Can one report from one bank make a difference? Yes it can, if people read it as a sign of things to come. At the same time, the capitulation I describe in IndyMac (IMB) turns to dust is another sign that we may be at the turning point.

Last Friday, June 11, 2007, the Feds basically put IndyMac Bancorp (NYSE: IMB) into receivership, even as they reminded customers that their deposits were insured by the Federal Deposit Insurance Corporation (FDIC) covering each individual account up to $100,000.

When I posted IndyMac (IMB) turns to stone on June 8, IMB had shut down lending. Now, as they have turned to dust from a shareholder perspective, customers are still lining up to withdraw their funds despite government assurances that there is nothing to worry about.

Some fret that this bailout will cost taxpayers money but most of the money will be coming from actual deposits as company assets are liquidated. However, while a majority of the costs are covered, the process will incur significant costs nevertheless, since this is only the tip of the iceberg and other banks are sure to fall into the abyss as well.

TheStreet.com's Jim Cramer says our problems are so widespread, he sees lots more IndyMacs before we're out.

You don't need me to tell you it's awful out there. You don't need me to tell you that there's no quick fix for any of these things. But what might help you understand why it feels so bad this time is that I have never, in my career, seen so many companies go off track at the same time. This is one unbelievable moment, and it is made more horrible by the day as companies' stocks just get pummeled, causing people to then question the very viability of the companies involved.

First, obviously, are Fannie Mae (NYSE: FNM) (Cramer's Take) and Freddie Mac (NYSE: FRE) (Cramer's Take). We don't know what will happen, but we do know that their futures are much darker than their pasts. Their best hope: a Democrat becomes president and shows the usual love to both. But as investments, they are pretty much perma-losers going forward. The losses are that heavy. Yes, it is true that two years from now they will be better, but will the government let them limp through to that? View them as calls on a Democratic win.

We all know that Citigroup (NYSE: C) (Cramer's Take), Wachovia (NYSE: WB) (Cramer's Take), Washington Mutual (NYSE: WM) (Cramer's Take) and National City (NYSE: NCC) (Cramer's Take) are in trouble. Bank of America (NYSE: BAC) (Cramer's Take) says it isn't in trouble, but obviously the market doesn't believe management because the stock failed to rally when it said its dividend was safe. Any short-selling hedge fund could hire 30 actors and have them line up at a Washington Mutual or two and get a bank run going. Then we would have to hear about a "hasty" Treasury department plan to bail out WM. Hasty? How can these guys not see it coming?

Would it be better if the government sought to stabilize interest rates at 5% (a general goal), or is it better to change the rates willy nilly? Is it better for people to know where they stand or is it impossible given the large number of economic events that remain out of our control?

I was against the federal stimulus package and posted Fund roads & bridges NOT mad money stimulus and later Serious Money: Stimulate productivity not consumption contesting the federal governments economic approach, or lack thereof, under the current administration (White House and Congress) and this thought came to mind along similar lines.

All of the interest rate manipulations of the past dozen years have overheated and slapped our economy around. Adding to that the funding of the war effort and the price of food and energy means that almost every American household has been left in a quandary.

The government seems to be very bad at planning, and slow to react, or at least perceive a coming storm. They do appear reactionary at best and everyone cheers when they find a way to stave off disaster for one more day. That is the case today as they take over IndyMac Bank (NYSE: IMB) and bail out Fannie Mae and Freddie Mac.

Last week, the FDIC oversaw the second biggest bank failure in U.S. history -- $32 billion IndyMac Bancorp (NYSE: IMB). I thought more would be on the way and this morning's New York Times estimates that 150 of the 7,500 U.S. banks will fail in the next 12 to 18 months. The FDIC only has $53 billion in its fund to cover bank failures so it is going to be needing much more cash, which it may get from raising insurance rates. No doubt those of us with bank accounts will pay the price.

For those looking to profit from this failure, it's time to get a hold of the FDIC's problem bank list and start estimating the ones that are most likely to get taken over. Here are some hints: look at their mortgages as a percent of total loans, their cash flow, when they have to pay back their debt, and the increase in the rate of their bad loans. The Times mentions two that are probably already on the radar of short sellers:

• BankUnited Financial Corporation (NASDAQ: BKUNA) in Florida, which trades at 77 cents a share and is probably too far gone to profit from as a short, went for $20 a share a year ago.
• Downey Financial Corporation (NYSE: DSL) in California, which trades at $1.69 today, traded at $65 a year ago.

Analysts believe that another 150 banks in the U.S. could fail over the near-term. According to The New York Times, "as many as 150 out of the 7,500 banks nationwide could fail over the next 12 to 18 months, analysts say. " The failure of IndyMac (NYSE: IMB) puts more focus on the problem

That puts investors in region banks in a tough spot. Shareholders in firms like NCC (NYSE: NCC) have watched the value of their stock drop from $33.54 to $4.42 over the last year as the bank cut its dividend and raised money. These holders can get out now because they fear an event which could take shares down to pennies. Or, they can hang on and hope that, once the financial crisis has passed, they may make some of their money back.

In many cases, the stock price is an excellent indication of what stockholders might want to do. IndyMac shares are down 99%. NCC's are down 85%, and its viewed by most as a bank that will "make it" because it has raised more money.

It would appear that the banks that the market is most worried about are off 90% to 96%. The institutions in that category probably carry the greatest risk of failure, if the stock market is an accurate indicator. The "if" part is the hard part.

Douglas A. McIntyre is an editor at 247wallst.com.

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Foreign revenues and other factors that once offered safety are now threats, and investors are doubting the growth prospects of Internet giants. See if Amazon, Cisco, Dell, eBay, EMC, Google, HP, Microsoft, Intel, Yahoo are undervalued, fairly valued or overvalued.
What's Hurting Tech Stocks Overvalued or Undervalued? - BusinessWeek

Best Places to Live 2008
Topnotch schools, good jobs, affordable housing, low crime, an active outdoor culture help Plymouth, Minnesota to replace Middleton, Wisconsin on top of Money Magazine's annual list of the Best Places to Live in America. Other places in the top 10 include Ft. Collins, Colorado, Naperville, Illinois, Irvine, California, Franklin Township, NJ, Norman, Oklahoma, Round Rock, Texas, Columbia/Ellicott City, Maryland, Overland Park, Kansas and Fishers, Indiana.
Best places to live 2008 - from MONEY Magazine
Also: Texas is Home to Most Cities on Best Places List

Bloomberg News reports that the Federal Deposit Insurance Corporation (FDIC) closed down IndyMac Bancorp (NYSE: IMB), a $32 billion (Q1 2008 assets) mortgage lender. Is this just the beginning of a string of such failures?

Having spent a summer 26 years ago working with the FDIC, I fear that that will be the case. What we worked on back then was a system to help the FDIC handle the assets that it acquired when it took over a failed bank. The FDIC's role is to sell those assets and get as much money as possible as quickly as it can so that it can pay people to whom the failed bank owes money.

Bloomberg reported that IndyMac failed due to a run by depositors who left the California mortgage lender with insufficient cash. Fortunately for depositors, customers will have access to funds this weekend via ATMs. IndyMac trails only the former Continental Illinois -- which was the biggest financial institution to close -- back in 1984.

A great book about the failure of its business partner, Penn Square Bank, Belly Up, reveals the important role of syndication -- originating a loan and then selling it to someone else -- in the failure of financial institutions.