Back in June 2008 I wrote my first article about FirstFed Financial for Seeking Alpha, describing its reckless management and dishonest accounting practices.
Then I followed up in August 2008 by writing about it and two other zombie banks, which I described as the Option Arm Triplets.
Following up on FirstFed is L.A. Business Journal Reporter Richard Clough, who describes a company operating under a FDIC cease-and-desist order and trying to cut expenses to the bone. It won’t be enough. The bank is deeply insolvent, and the only reason the FDIC hasn’t taken it over already is that it is understaffed.
Look, I’m in the article too!
Still, Giraldin pointed out, just a year of unwise lending has pushed the company to the brink of failure.
Its stock, which traded at more than $69 a share in 2007, closed June 25 at 35 cents.
The stock has long been a target of short sellers, particularly after the failure of IndyMac, when many began speculating that FirstFed would be closed soon thereafter.
Greg Weston, a real estate litigator who shorted the stock for months as the price dropped, wrote an online article detailing the reasons investors should do so. Weston, founder of the Weston Firm in San Diego, recently stopped selling the stock short and closed out the position. He doesn’t think the company has a bright future, but since the stock is less than $1, most of the play is gone.
“It’s pretty much dead as an investment,” he said.
Calculated Risk also covers the article and has an active comment thread on the topic.