A concern voiced by some who previewed this site, is that, in trying to defend myself publicly, plaintiffs or others could try to portray me as an “ex-banker” seeking to blame others.
I guess they can try to characterize me that way, but isn’t everyone entitled to defend themselves when they are unfairly and inaccurately publicly attacked?
Everything that I and my family have, I have earned through my own hard work and talents.
I was not born with “a silver spoon in my mouth,” although I am very thankful to my parents for their tremendous love and support throughout my life.
Like most Americans, I worked hard for everything I have and have overcome significant adversity in both my professional and personal life.
I was raised in a middle class family in Rancho Cordova, California. I’m a fifth-generation Californian on the Portuguese side of my family.
When I was young, my dad was an auto mechanic and my mother was a homemaker. My dad worked his way up into management at Pacific Gas & Electric and graduated college two years before I did after more than a decade of night school. And my mom got her A.A. degree and went back to work when I and my siblings were older, as a secretary for the local school district.
I attended public schools and worked hard and was a good student. My parents main goal was to make sure my siblings and I did well in school, so we could “get a good desk job.” I remember one quarter in junior high, I came home with fives A’s and one B and got a lecture; “you can do better in that subject.” The next quarter, I came home with six A minuses and I will never forget my dad saying, “Mike, you went down in five subjects and up in only one.”
I had a few summer jobs in high school and in between high school and college, my dad got me a job at PG&E (it was the only job I ever got that I did not get on my own), cleaning the mechanic’s garage from the late evening until early morning. It was dirty and hard work. My grandmother cleaned office buildings for the State of California for a living. I was taught by my parents to respect everyone and the work they performed, but I was expected to “get a college degree and get that desk job.”
I attended California State University, Sacramento (Sac State as it was called then) and worked at the local blood bank as a clerk and driver. I usually worked 12 hours on Saturday and another 12 on Sunday, and some semesters I would finish a graveyard shift at 7 am Monday morning and head to an 8 am class. I lived at home to save money, worked at least 24 hours a week from my sophomore year through graduation, and when I graduated I had six grand in the bank and no student loans. I took a full class load and some summer school and graduated in four years with a 3.86 GPA. I received a Senior Achievement award, an award that recognized a half dozen or so of the top graduates out of a class that numbered in the several thousands. I was also President of the accounting fraternity and Vice President of the business honor society and was an intern at a major accounting firm.
These activities, all focused on getting that “good desk job,” unfortunately did not leave much time to have a social life.
Before I graduated, I took the CPA exam and passed all four parts and received a job offer from all but one of the “Big Eight” public accounting firms.
I went to work in August 1984, for Peat, Marwick, Mitchell, & Co. (now KPMG) as an assistant accountant, making a starting salary of $19,500 per year. I became a CPA once my requisite 2 years of work experience was completed.
In 1987, I was offered a job to become Controller of Commerce Savings Bank, a small Sacramento thrift, for a salary of $35,000 a year and jumped at the chance. I remember giving notice to the audit partner-in-charge. When I told him, he put his head on his desk and literally cried, and then in anger threw his keys against the wall and said, “You’re making a mistake. You will be a partner here before you are thirty.” Even though I had the title of Controller, I was really the “Chief Financial Officer,” as I was the most senior financial officer and reported directly to the CEO. During the interview process, the CEO asked me my how old I was and when I told him 24, he seemed surprised and decided to reconsider other candidates before finally offering me the job. But I would have to wait, at least a little while, for the CFO title.
Roughly a year later, I became Chief Financial Officer and shortly thereafter, in addition to my accounting and finance duties, I took over a small, money-losing mortgage brokerage division of Commerce. The thrift became a bank and I became the #2 officer; a Senior Executive Vice President in charge of mortgage banking. In 1992, my last year at Commerce, as a result of the mortgage banking division I built, we were the top performing bank in the State of California, in terms of return on equity.
In January, 1993, at 30 years old, I was hired to take over a money-losing, publicly-traded, mortgage REIT, headquartered in Pasadena, California. The REIT had no business and three employees besides me and the market valuation of the company at the time was roughly $75 million.
We fought and survived (barely) the 1998 Global Liquidity Crisis, as a mortgage REIT, and I said, “never again.” To avoid being reliant on highly volatile capital market funding, I developed and led our efforts to buy First Federal of San Gabriel Valley and merge all of our business into this small thrift. We were approved by the federal bank regulators and became a Federal Thrift on July 1, 2000. That thrift was renamed Indymac Bank.
During this time, I had to fight a very challenging personal health issue. I had never been in great health. When I was a boy, I was diagnosed with juvenile rheumatoid arthritis and put on a regime where I took huge daily doses of aspirin. Just after graduating college, while working in public accounting, I developed a bleeding ulcer and nearly died. I was rushed to the hospital and they pumped blood into both of my arms at the same time, with some sort of compression device. This was 1985, before tests for many blood diseases. I had a rare blood type (B-), so they ran out of blood in Sacramento and had to reach out to hospitals in the San Francisco Bay Area. I survived and my health, life, and career all prospered. Then in early 1998, I received a call from a life insurance company representative who said (based on a physical I had taken), “You don’t have what Magic has, but you have Hepatitis C.” What’s that, I thought? A few months later, I began a six-month regime of interferon treatments, but it made me so sick and I needed a clear mind and strong body to see Indymac through the 1998 Global Liquidity Crisis, so I went off the program early and relapsed. After I was sure Indymac was safe and sound again, I began a year-long treatment of interferon shots three times a week and ribavirin pills daily. It was grueling and I was sick nearly every day for a year, but beyond the few days where I initially went on the regime, I never missed work and I was thankfully cured by early 2000.
Over 15+ years, I gave everything I had to Indymac and its employees, regulators, and shareholders, only to lose it in this unprecedented financial crisis. We were “Not Too Big To Fail.” At its peak, Indymac had approximately 10,000 employees, over $33 billion in assets, $92 billion in annual loan volume, and $201 billion in servicing. By 2007, Indymac was the 7th largest savings and loan and 2nd largest independent mortgage lender in the U.S., with a market value in excess of $3 billion.
While many people have helped me throughout my professional career, I built everything I and my family have on my own; through my honest, hard work.
We Were “Not Too Big To Fail”
I am happy that the officers and directors of Indymac were largely able to avoid most or all of this meritless litigation and the resulting damage to their reputation, careers, and finances (although a few other officers are tied up in one or more of the government cases and/or private litigation with me). With that said, Indymac was a relatively large, modern corporation, with very strong, independently-rated corporate governance; including a significant and experienced management team and a first-class, independent board of directors. The board of directors and bank regulators approved our strategic and financial plan and I and a very strong and experienced management team executed it. Many of these lawsuits, including the SEC’s and FDIC’s, ignore modern corporate governance and I believe send an inappropriate message to corporations and their CEOs and CFOs. The message being that, rather than following well-established management and corporate governance principles, these two officers alone should make every key decision and check everyone’s important work, because they alone are likely going to be the only ones sued if something goes wrong. Two key reasons the plaintiffs have sued primarily just the CFO and myself are as follows: 1) SOX certifications (a flawed and abusive law in my view), and 2) a very tactical and cynical one; they don’t want other defendant’s lawyers “eating up” potential D&O insurance settlement proceeds in their defense.
In hindsight, any mistakes we made were minor compared to the systemic and macroeconomic events that unfolded in this crisis. If Fannie Mae and Freddie Mac, two government-sponsored, AAA-rated, mortgage firms could not survive (among many others who did not survive or needed unprecedented assistance), how could Indymac? We made it longer than any other major independent home lender, because we were well-managed. We just unfortunately were “Not Too Big To Fail”.
The “ships” that the “Too Big To Fail” CEOs inherited, were bigger, and far more diversified financial institutions, that were built by generations of management over many decades. Some were more than a century old. These institutions and their CEOs also benefited from “Too Big To Fail” credit ratings and cost of funds (as a result their size, age and prior government bailouts/assistance), and despite this advantage, the fact is all of them needed government help to survive this crisis. I have come to terms with that and the fact that Indymac Bank received no government assistance. I have not come to terms with the inconsistency between those facts and the fact that the SEC, FDIC, and others are now seeking to blame me and other honest and capable individuals.