California-based thrift IndyMac, a high-risk mortgage lender that collapsed in July, is expected to be sold this week to a group of private investment firms.
The Federal Deposit Insurance Corp.'s takeover was one of the largest rescues of a bank in U.S. history. IndyMac's failure culminated with thousands of it customers lining up at branches to withdraw their money in fear that their deposits were in jeopardy.
The FDIC has been trying to sell IndyMac since, and was taking purchase offers until Dec. 12. FDIC officials said Monday that a deal will close by the end of the year.
Among the prospective buyers are J.C. Flowers, a private-equity firm; Paulson, a hedge fund company; and Dune Capital Management, a private investment firm, according to The Wall Street Journal. The newspaper reported that the Office of Thrift Supervision confirmed those firms as the buyers. A Supervision officer declined to comment to USA TODAY about the Journal report.
For the sale to close, the group has to meet specific regulatory standards, which are complicated for private-equity funds and hedge funds.
"If they are invested in private commercial companies, such as manufacturing companies or retailers, they typically cannot invest in a bank at the same time," says Oliver Ireland, partner in the financial services practice at Morrison & Foerster.
"But they may be able to set up a new fund that can invest in the bank."
In the past few months, U.S. regulators have relaxed some rules to encourage investment into the troubled financial sector.
The FDIC last month expanded the pool of qualified bidders for troubled banks to include those institutions that do not currently have a bank charter, and in September, the Federal Reserve also eased some regulations.
This year, Christopher Flowers, founder of J.C. Flowers, was approved by regulators to buy First National Bank of Cainesville in Missouri.
Representatives from J.C. Flowers, Paulson and Dune Capital Management did not respond to requests for comment.
Prior to the mortgage industry collapse, IndyMac had been a highflying mortgage lender that specialized in loans that were made with little down payment.
At the time of its failure, the thrift had $32 billion in assets, which made it the fourth-largest financial institution to be taken over by regulators.
The FDIC has estimated that the failure has cost the agency between $4 billion and $8 billion.
Contributing: The Associated Press