by KERRI PANCHUK
Monday, July 11th, 2011, 9:26 am
The Federal Deposit Insurance Corp. filed a negligence lawsuit against former IndyMac CEO Michael Perry last week, accusing the executive of producing risky home mortgages that eventually soured, causing more than $600 million in losses.
In the complaint, the federal regulator, which took over IndyMac after the bank's failure in 2008, accuses Perry of putting the bank at risk by failing to end the "production of a pool of more than $10 billion in risky, residential loans intended for sale into a secondary market." The FDIC claims Perry knew production of the loans was occurring at a time when the secondary market was becoming unstable and illiquid due to ongoing concerns over credit quality.
The FDIC claims Perry knew his actions were risky, quoting him in the lawsuit saying, "Clearly, our risk offices are not to blame for the situation INIB finds itself in. This time the losses are 1000/0 operating management's fault (from me on down), there is no substitute for experience, good common sense and business judgment."
The suit cites another quote from Perry where he allegedly states, "Look, we've had lousy performance and the buck stops with the CEO … I'm a big believer in being held to account."
Benjamin Razi, one of Perry attorneys wrote in a statement, "the FDIC’s claim is that Mr. Perry should have foreseen the financial crisis — even though nobody else did. Not the FDIC. And not any of the other regulators responsible for supervising IndyMac. Of course, the complaint neglects to mention that the FDIC’s own Chairman, Sheila Bair, acknowledged that 'few saw all the risks' in the conditions leading up to the crisis."