For some, the financial crisis was very, very good.
Five years ago, after the mortgage market had imploded, a group of investors — including the billionaire hedge fund managers George Soros and John A. Paulson — banded together to create a new bank from the wreckage of the failed California lender IndyMac.
Now those investors are set for a big payday, thanks to the CIT Group, a lender that itself ran into trouble after the housing bust.
The deal illustrates how casualties of the financial crisis have moved on, and even prospered.
The deal is a coup for John A. Thain, the Wall Street executive who sold Merrill Lynch during the depths of the crisis and was later unceremoniously ousted from the bank. Under his leadership, CIT, a lender to small and midsize businesses, has grown — to the point where, with the acquisition of OneWest, it will be deemed a systemically important bank for the first time.
Where the bank is now is a far cry from late 2009, when CIT spent 38 days in Chapter 11 protection to help put in place its corporate restructuring plan, Tuesday’s deal will roughly double the size of its commercial bank, to $28 billion in deposits and $67 billion in assets. And the cost of its funding will drop to about 2.4 percent.
“We have really repaired all of the problems coming out of bankruptcy,” Mr. Thain said in a telephone interview.
Investors in OneWest will have reaped a windfall from their investment in the lender. Led by Steven T. Mnuchin, a former partner at Goldman Sachs, the investors formed the bank in 2009 with $1.55 billion of their own money by buying the remains of IndyMac from the Federal Deposit Insurance Corporation.
Now, they stand to have more than doubled their money. The approximately $1.85 billion in proceeds from the sale to CIT will come on top of more than $2 billion in dividends that the investors have already taken out of the bank.
Take Mr. Paulson, who famously collected nearly $4 billion by betting against failing home mortgages in the run-up to the financial crisis. His firm originally invested $400 million for a 24.9 percent stake in the nascent OneWest, according to a person briefed on the matter.
In a letter on Tuesday to clients, his hedge fund reported taking home $788 million for its stake in the bank — on top of having already received $551 million in dividends.
Such results are a rich turnaround for what had been one of the biggest bank failures during the financial crisis. When IndyMac collapsed because mortgages it made — most of which required little in the way of down payments or documentation — soured, it became the second-biggest savings and loan to fall in 2008, behind only Washington Mutual.
Efforts by the F.D.I.C. to enlist private investors to help rebuild failed banks opened the door to the OneWest deal. Mr. Paulson joined Mr. Mnuchin in a consortium that also included Mr. Soros; Michael S. Dell, the founder of the computer company that bears his name; and J. Christopher Flowers, a former Goldman banker who specializes in financial firm investments.
Since then, OneWest has blossomed into a healthy regional lender serving the Los Angeles area. Its assets have grown to $23 billion from $16 billion, while it now counts 73 retail branches across Southern California.
By last year, however, the bank’s lenders appeared ready for an exit. The firm explored a potential sale of itself while also readying a possible initial public offering.
Through Tuesday’s deal, those investors will receive $2 billion in cash and 31.3 million shares of CIT, valued at $1.4 billion. Mr. Mnuchin will become a vice chairman at CIT, while he and a OneWest director, Alan Frank, will join the acquirer’s board.
OneWest’s proposed owner has had a similar renaissance. Before the financial crisis, CIT sought to garner new power and prominence by moving beyond its traditional, sleepy business of commercial loans to the likes of Dunkin’ Donuts. The answer was in more aggressive lending, particularly for home and student loans.
But the collapse of subprime mortgages eventually shut off CIT’s access to the markets where it drew its lifeblood, cheap financing, and the company nearly collapsed before negotiating a rescue plan with creditors.
When Mr. Thain arrived as chief executive in early 2010, the firm was struggling to clamber back from its near-death experience. Borrowing money was punishing, with the lender paying a 13 percent interest rate on its $31 billion in debt.
His goal: making the lender more stable, particularly by building up CIT’s own stable of deposits to provide a lower-cost source of financing for its loans.
But until last year, he operated under the watchful eye of the Federal Reserve, running many major business decisions past regulators while unable to undertake others — including acquisitions. That clampdown lifted last year, and CIT soon began talking with OneWest about a potential deal.
“We’d been looking for a deposit base for the past year,” Mr. Thain said. “This one really came together as a good fit for us.”
Last month, Mr. Thain teased investors with the promise of a big bank acquisition. And he hinted that CIT would cross the government’s definition of a “systemically important financial institution,” one whose failure could wreak significant damage, by vaulting over $50 billion in assets.
Investors applauded the deal on Tuesday, as shares in CIT jumped nearly 11 percent, to $48.71.
Not all of the rewards from Tuesday’s deal are financial. CIT’s continued rebound has partially revived the reputation of Mr. Thain, a onetime golden boy of Wall Street whose career jumped from co-president of Goldman to chief executive of the New York Stock Exchange.
In 2007, he was appointed the chief executive of Merrill Lynch, and subsequently engineered its lifesaving sale to Bank of America in September 2008.
But Mr. Thain was forced out of Bank of America a year later over multibillion-dollar losses at Merrill, huge bonuses to several employees and renovations to his office.
CIT was seen as his humble re-entry into Wall Street. Yet with Tuesday’s deal, the firm will eventually bear the imprimatur of being a systemically important lender — just like his former employer, Bank of America.