July 14 -- Dow 11,055 (down 45 points); trading range, 327 points

The third-largest bank failure in U.S. history made headlines after IndyMac Bancorp collapsed following a run on the bank.

An FDIC takeover of IndyMac attempted to keep operations as normal as possible, but doubts began to arise about other troubled regionals like Washington Mutual (later sold to JPMorgan Chase) and National City (now a part of PNC Financial after an October "take-under," where the company was purchased at a discount to its stock value).

But wait, there's more. After years of financial shenanigans and controversy, Freddie Mac (NYSE: FRE) and Fannie Mae (NYSE: FNM) were placed into conservatorship in a federal takeover of the government sponsored enterprises. This contributed to another slaughter in the financials, with 96% of the sector posting a loss for the session.

Oh, and if you wanted to drown your sorrows over an American-owned brew, scratch Budweiser off your list. Anheuser-Busch agreed to merge with Belgium's InBev for $70 a share, or $52 billion.

Greg Tucker is the executive editor of OptionsZone.com.

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.

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.

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.

No more home mortgages for the time being. The former number two originator of home mortgages in the United States, IndyMac Bancorp (NYSE: IMB), is shutting down its operations and laying off 3800 workers, more than half of its employees.

By halting its prime business, IMB might as well have announced they have turned to stone, as it seems its financial situation is frozen for now. Last quarter it announced continued losses and changed its outlook from being profitable in the fourth quarter to seeing nothing but losses through 2008.

It is always difficult to discuss one's failings, but nothing has been worse than my suggestion that IndyMac might be a screaming buy last year. The stock is down 97%. The sad truth is it was a screaming sell and my worst call since I have been writing for BloggingStocks.com. That will be a separate story.

Today, IndyMac is trading down 47% to $0.37. It will have to restructure once again and will be submitting a survival plan to the FDIC. The current market cap is about $37 million, while its losses over the last twelve months exceed $600 million.

As I wrote in this article, there's no way you should be buying Apple Inc. (NASDAQ: AAPL) stock right now. Yes, it could break out to new highs, but until it actually does, it's just a triple-top chart pattern and considering we're talking about a measly 7% gain from here to the break-out level, just wait until it breaches $203 and does so convincingly. After all, if it's meant to fulfill the $300 prophecy as foretold by the oracles (aka market cheerleaders), you'll still have plenty of room to profit, just without all the risk. Yup, even with fundamentally sound companies, it's crucial that you consider technical analysis to your investments, as Google Inc. (NASDAQ: GOOG) shareholders learned the hard way after its perfect triple-top back above $700 (a top I called to short based on -- what else? -- technical analysis!).

Even though those are the stocks about which I get most email, they aren't the ones I want to write about today -- because the stocks I like are the ones I talk about in my new internet TV show LiveStock:



(Contact me with any stock market questions you'd like answered on live broadcasts every Friday from 1-2PM which you can view HERE) have been influenced by some kind of temporary catalyst, whether it's an analyst or newsletter recommendation, message board hype, or stock promoter spam. After that's gone, all you have left are struggling small-cap companies looking to raise capital. It's ugly.

Today IndyMac Bancorp, Inc. (NYSE: IMB) reported that its quarterly loss was cut by 64% leaving investors with a small glimmer of hope... although the company has done a small about face. Previously IndyMac had suggested it might be possible to get back to profitability by the fourth quarter. They now are reporting that they probably will not report a positive quarter in 2008.

It was only ten days ago that CEO says IndyMac has 'turned a corner' but the story continues to evolve. The stock closed down today at $3.06, losing 37 cents or almost 11% of it's value.

Disclosure: I own shares of IMB.

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.

As one who was greatly embarrassed by making a premature recommendation (being kind) that investors give consideration to acquiring shares in IndyMac Bancorp (NYSE: IMB) prior to its dramatic collapse; I can ill afford to suggest that folks jump in now. However, I might just do that.

Yesterday IndyMac jumped about 20% as it was reported that CEO says IndyMac has 'turned a corner' finishing the day at $3.97 a share -- still a long way from its 52-week high of $37.50. "Given the decline in our stock price, some people have questioned IndyMac's survivability in the current environment," Chief Executive Michael Perry said. "I am here to tell you that I believe we have turned a corner and that our business is improving. We are now achieving profitability with this new production model, with all of our nine regional wholesale centers and 104 of our 152 retail lending branches being profitable in March," Perry said.

The message is clear from the top, with negative earnings and corresponding negative P/E ratio just about any turnaround would make this stock cheap. Perry is correct that the stock is priced for failure. What should the price be if Perry gets IMB back to profitability by the end of the year? A lot more than it is now.

The stock moved way up at the opening bell this morning trading to $4.20, so there are a lot of investors who share my view ... and then it traded down, so then again...

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 IMB.

TheStreet.com's Jim Cramer says the bad news should make sure the Fed keeps cutting.

We haven't broken the spiral yet. The waves off of homes just keep fighting new areas to hurt, new municipal projects to ding, new large jobs numbers lost, new margin calls for places like Thornburg (NYSE: TMA) (Cramer's Take), which I thought was out of the woods.

Then I saw the TMA news and the verbiage that there was another problem in the markets in February that will require margin calls. This is the Alt-A culprit, the hard-to-value loans given to people who look likely to return the money because they have good solo jobs but on paper haven't been performing. TMA has a ton of jumbo loans to these people. Only back-from-the-grave Indymac (NYSE: IMB) (Cramer's Take) is worse.

Truth be told, we know these are all momentary issues. No bank seems willing to let anyone fail here, and neither TMA nor IMB will be so hurt by these new issues that they can crush the market. Same as Fannie Mae (NYSE: FNM) (Cramer's Take) yesterday -- staggering losses, but so what?

Indymac Bancorp (NYSE: IMB), a savings & loan and mortgage originator, announced the suspension of quarterly dividend payments indefinitely as it reported a Q4 loss of $509M or $6.43 per share.

IMB increased credit reserves to $2.4 billion from $619 million in Q4-06.

IMB says: "Expected to "Raise" an additional $400 Million of capital in 2008. Near record $6 billion in operating liquidity and no capital markets funding."

IMB over all option implied volatility of 119 is above its 26-week average of 100 according to Track Data, suggesting larger price movement.

Option Update is provided by Stock Specialist Paul Foster of theflyonthewall.com

The NYSE released its short interest figures by company. The numbers compare shares sold short in companies listed on the exchange as of October 31 compared to October 15.

No one is likely to be surprised that the short interest in Countrywide (NYSE: CFC) rose very sharply, by 27.1 million shares to 106.9 million as traders bet the stock will drop further.

Shares short in other financial stocks also grew. At Wells Fargo (NYSE: WFC), the figure rose 8.1 million to 47.7 million. At IndyMac Bancorp (NYSE: IMB) the number went up 3.9 milion to 43.2 million.

Short interest in several stocks at troubled companies dropped, indicating that traders believe that the shares may not fall further. The short interest in Sprint (NYSE: S) fell 12.3 million shares to 39 million. Shares short in AMD (NYSE: AMD) dropped 8.8 million to 67.1 million. And, the short interest in Motorola (NYSE: MOT) dropped 4 million to 28.5 million.

The short interest in the Russell 2000 Index moved up over 10%. That is a lot of traders who think the market is headed down.

Source: WSJ

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

Thrift and mortgage bank IndyMac (NYSE: IMB) recently announced that it will return to the jumbo mortgage space after briefly halting its lending operations due to the chaos in the lending space over the last month. For those who aren't familiar with the term "jumbo loan," these are mortgages that are greater than $417,000 in size. They are recategorized because the government mortgage companies Fannie Mae (NYSE: FNM) and Freddie Mac (NYSE: FRE) can't buy mortgages above this level

This re-entrance to the space symbolizes confidence on from the executives and brass at IndyMac. This move also makes great strategic sense for the company because prime borrowers are facing huge rate increases in the jumbo mortgage space, allowing IndyMac to demand a higher yearly payment for these loans.

Despite their large size, this lending is a rather low-risk activity when compared to the much-publicized subprime mortgages. They are typically made to high-earners with very strong credit and income history. With the ability to charge higher rates in the current market, lending in the prime jumbo mortgage space should be a very attractive line of business for IndyMac. However, I'd still wait for the dust to fully settle before getting involved with any of these mortgage companies.

The New York Times [registration required] reports that American Home Mortgage Investment Corp. (NYSE: AHM) is shutting its doors thanks to the fear of its lenders -- who provide the wholesale money they lend to home buyers -- that they won't get their money back. Doug McIntyre posted about this here. Several of AHM's peers -- IndyMac Bancorp (NYSE: IMB) and Accredited Home Lenders Holding (NASDAQ: LEND) -- are also in rough shape.

Last October, I began looking for ways to profit from the collapse in the housing market. My best idea -- posted in December -- was to short shares of NovaStar Financial (NYSE: NFI) which dropped from $116 to $7.19. This post got the attention of a reporter from NPR's MarketPlace who dropped by my office this week to interview me about where the next opportunities for short profits might lie.

My answer is that I don't know. That's because the hedge funds, endowments, pension funds, and insurance companies that buy the mortgage backed securities (MBS) constructed from the loans that NovaStar and its peers originate are not disclosing the value of their MBS holdings. To identify short selling opportunities, I'd like to know this information because many MBS holders will be wiped out.

Bloomberg News reports that Bank of America Corporation (NYSE: BAC) thinks that mortgages have further to fall. And Bank of America names specific companies which it believes will be damaged the most.

The bank believes that mortgage losses so far are "the tip of the iceberg." That's due to the enormous volume of variable rate mortgages scheduled to reset in the next couple years -- specifically $515 billion in 2007 and another $680 billion worth in 2008. If that's not bad enough, interest payments on about $900 billion of the riskiest subprime home loans are due to increase in 2007 and 2008.

I've been posting about real estate problems since last October. But Bank of America seems to think that two of the stocks most exposed to the mortgage mayhem have further to fall because they hold mortgages themselves as well as selling them on to investors and may not have set aside enough money to cover losses. These two:

• IndyMac Bancorp (NYSE: IMB) looks cheap. Its Price Earnings to Growth (PEG) ratio of 0.2 -- based on a P/E of 7.4 and earnings growth of 35% to $3.97 in 2008 -- makes it look extremely cheap to me unless the analysts who track IndyMac are way off the mark.
• Countrywide Financial Corp. (NYSE: CFC) looks cheap. Its PEG ratio of 0.5 -- based on a P/E of 9.7 and earnings growth of 19% to $4.55 in 2008 -- makes it look inexpensive to me unless the analysts who track Countrywide are way off the mark.

What investors need to figure out is whether their current stock prices reflect all the bad news or whether things will get still worse. I'd be inclined to think that the bad news is reflected in the stocks already and Bank of America is wrong about these two stocks. What do you think?

Peter Cohan is president of Peter S. Cohan & Associates, a management consulting and venture capital firm. He also teaches management at Babson College and edits The Cohan Letter. He has no financial interest in the securities mentioned in this post

After a recent story, Chasing Value: Insider buying at IndyMac Bancorp, a reader, Alex, asked, "What's your take on American Home Mortgage Inv (NYSE: AHM). The fundamentals seems to be amazing like IMB's?"

It seems to me I had looked at this stock before, and since I neither wrote about it nor put it on my watch list, there must have been something about it that did not thrill me. After reviewing the matter I can see what it was. I was looking at it when it was at a high, and being a value investor passed on it. Glad I did because, as Alex mentioned, like IndyMac it came down hard from almost $40 to close Monday at $21.

Now it is a value play so I am interested. The short answer is, yes I like this pick. Is there risk, yes -- is it going out of business? I do not think so. From a recent story, JMP Starts AHM at 'Market Perform', which does not speak glowingly about AHM, one might conclude this stock is a loser. And if you bought it recently, this would be correct. But I think that stocks like this are worth a look as long as they keep their doors open for business.