Fear of failure

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: asset side of the balance-sheet, IndyMac’s lending zoomed from $29 billion in 2003 to a peak of $90 billion in 2006. More than two-thirds of its lending in that year was in Alt-A loans, a class of mortgages for borrowers who cannot document all their income and assets. As well as being riskier than normal mortgages, these loans are also more susceptible to abuse. IndyMac is reportedly under investigation by the FBI for fraud.

No part of the housing market is thriving, but lenders with less exotic portfolios can sleep a little easier. Wells Fargo, the country’s second-biggest mortgage lender, briefly lifted the gloom hanging over bank stocks on July 16th after it announced better-than-expected second-quarter results. The relief will probably be temporary. Investors may have been in denial about the depths of the hole banks are in up until now. If the next stage of the grief cycle—despair—is indeed setting in, times will get even more testing.