July 2008 - Southern California Hit By Great Recession
Several adverse economic and financial factors contributed to what is known as The Great Recession in the late 2000s, which was felt not just nationwide, but worldwide. Some of those factors originated, or were sharply felt in Southern California.
On July 11, 2008, the Pasadena-based Independent National Mortgage Corporation, otherwise known as IndyMac Bank, was taken over by the Federal Deposit Insurance Corporation. The bank had listing assets of $32 billion and deposits of $19 billion. The bank had, for years, specialized in Alt-A loans (a loan level ranked between prime and sub-prime), comprising 80 percent of its business, and had become the number one lender of Alt-A mortgages. Hedge fund investors pulled out as the real estate market collapsed, and the bank also involved itself in the risky reverse mortgage business. In May of that year, the bank cut 4,000 jobs, and rumors of failure caused a bank run, with $1.3 billion being withdrawn by customers in an 11-day period, causing a liquidity crisis.
IndyMac reopened on July 14 as the bridge bank IndyMac Federal FSB. In August, IndyMac filed for Chapter 7 bankruptcy, and in March 2009, the bank's assets were purchased by OneWest Bank, also based in Pasadena.
Meanwhile, the housing foreclosure crisis hit California especially hard, with the largest number of foreclosures of any state. Abusive mortgage lending practices, the lack of regulatory oversight, and the mishandling of loans by Wall Street were contributing factors to the crisis.
No region in the state exemplified the foreclosure crisis more than the Inland Empire region; with the Interstate 15 freeway corridor earning the moniker, "Foreclosure Alley."
This "SoCal Connected" segment from September, 2008 highlighted the foreclosure crisis in the Inland Empire:
Unemployment increased exponentially in 2008; the unemployment rate in the Los Angeles area was 6.8 percent in January, 2008, and over the next 18 months, rose to 13.8 percent. A decline in the unemployment rate in the L.A. area did not occur until after it peaked at 14.5 percent in July, 2011.
