Craigla1

Why Downey Financial is Not IndyMac

"At a market cap of $61 million, DSL is trading at 6% of book. "

"...but the value of this collateral is not 6% of par, in our humble view."

It's pretty sloppy journalism when a blogger doesn't recognize the fact a market cap of 6% of book does NOT at all equate to assets being worth 6% of par. Remember a bank is highly leveraged. If assets depreciate 10%, and equity capital is 10% of assets, you basically have an insolvent institution, and market cap should be zero.

You don't need anywhere near a write-down of 94% of assets for insolvency to occur. Just a small fraction of this. And DSL has about the highest levels of non-performing assets of any financial institution in the country.

They are insolvent if proper mark-downs were to occur. And the re-sets of negative am loans is nowhere near done. Not even close. These re-sets continue unabated through 2009.