Regulators ripped in Irwin Financial postmortem

May 5, 2010
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No executive wants the government telling them what to do. But a new analysis of the crash of Irwin Financial Corp. in Columbus makes one question what was going through the head of Chairman Will Miller before the institution last fall became Indiana’s first and only bank to be liquidated during this banking crisis.

The Federal Reserve Bank of Chicago several times in the past decade warned the Columbus bank’s directors and executives that their expertise and controls lagged behind the institution’s explosive growth into commercial lending and home mortgages.

In fact, the Fed’s Office of Inspector General says in the report, warning lights were blinking so brightly that the Chicago Fed should have cracked down. Perhaps the bank could have been saved, the report reasons.

Indeed, the report cites several instances in which warnings apparently were shrugged off.

Here’s how bad things got: Irwin’s assets nearly tripled in the five years ended in 2008, but the bank’s net income actually fell. And the consumer lending business developed a loan program that didn’t require borrowers to verify their incomes.

For other articles on the report and Irwin's downfall, click here.

So, the Fed is kicking itself for not cracking down on Irwin. But what about Miller, the scion of philanthropist and industrialist J. Irwin Miller, who built Cummins into a powerhouse and kept the bank humming all those years? As the fifth generation to run the bank, what was he thinking?

And what about the directors, who in addition to Miller included Dave Goodrich, the former president of Central Indiana Corporate Partnership and former chief of what is now the commercial real estate powerhouse Cassidy Turley; Dayton Molendorp, CEO of One America, the Indianapolis-based insurer; R. David Hoover, Chairman of Ball Corp., the glass jar and aerospace company headquartered in Muncie before it was moved to Colorado.

These are gold-plated names. Yet, the report paints them as something otherwise.

What are you thinking?

  • Irwin Union
    Having once worked there, I could see it coming. The little bank that wanted to be a big bank. Some excuse for a management team. And now who is heading up the successor, the former IUB President, Claude Davis. Oh, boy, ain't that sweet???

    And you're right, Norm, where and what is the culpability of the former directors? They didn't seem to mind taking their director's pay. Were they motivated by greed as well? Or did they just want to compete with the big boys so badly that they couldn't see the train wreck waiting to happen? Makes you wonder how sharp or how involved they really were.

    It is truly a sad state of affairs. And do I want to move my money to AUL? Me thinks perhaps not.
  • Who Got Hurt?
    The Fed doesn't regulate, it is all about 'booze, schmooze and politicians deciding who will looze.' Apparently the 'booze and schmooze' part went on for years, but finally came full circle. Miller and his cohorts took millions upon millions out in cash in options and bonuses and outrageous salaries. While Miller did have a sizeable direct holding by any layman's standard, he did his best to dump those shares just like the the CFO. Miller sold half his direct holdings when the stock was over $25, and the CFO sold most or all his as soon as the options were converted. They enriched themselves for years while building a house of cards built upon risk and paper profits (not cash profits). Though other family members wanted the 'indirect shares' sold, had Miller done so Miller's direct holdings would have lost a lot of value ... plenty of self-dealing there. Miller has never been a businessman of talent and principle, and the result of IFC proves out my opinion. He surrounded himself with 'Yes-Men' who were equally or more inept at business than he. Once can't help but recall the White Water Investment venture capital fund that lost millions. This was followed up by Irwin Business Ventures in the 1999-2001 time frame. Oh, and I forgot WW Investment Fund III. Three strikes in VC. IBV again lost millions. What I find most telling is the reward structure built around IBV, had it done well (of course little chance of that), was all about compensating the managers of it and not the shareholders of the corporation, whose money ultimately was lost. It's a great example of FIDUCIARCY INCOMPETENCE. When I read about Miller's brother's lawsuit, I can only wonder wny the SEC isn't on the trail of all the officers of IFC, to recover the millions STOLEN (in the law or not, in my book it was stolen) in so-called BONUSES and OPTIONS for creating a mountain of risk and paper profits. Anyway, GOOD-RIDDANCE to Miller and that clan of losers, it will be a long, cold day in business-hell before we see the ass-kissing incompetents again. Of course with the Millions they 'stole' they won't need to work ever again.

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