LOS ANGELES, July 11, 2008
Feds Seize IndyMac's Assets As Bank Fails
Second Largest Financial Institution To Close In U.S. History; Will Reopen Under FDIC Control
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An IndyMac Bank branch office in Burbank, Calif., is seen Tuesday, Jan. 15, 2008. (AP Photo/Reed Saxon)
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The bank is the largest regulated thrift to fail and the second largest financial institution to close in U.S. history, regulators said.
The Office of Thrift Supervision said it transferred IndyMac's operations to the Federal Deposit Insurance Corporation because it did not think the lender could meet its depositors' demands.
IndyMac customers with funds in the bank were limited to taking out money via automated teller machines over the weekend, debit card transactions or checks, regulators said.
Other bank services, such as online banking and phone banking were scheduled to be made available on Monday.
"This institution failed today due to a liquidity crisis," OTS Director John Reich said.
The lender's failure came the same day that financial markets plunged when investors tried to gauge whether the government would have to save mortgage giants Fannie Mae and Freddie Mac.
Shares of Fannie and Freddie dropped to 17-year lows before the stocks recovered somewhat. Wall Street is growing more convinced that the government will have to bail out the country's biggest mortgage financiers, whose failure could deal a tremendous blow to the already staggering economy.
The FDIC estimated that its takeover of IndyMac would cost between $4 billion and $8 billion.
Pasadena, Calif.-based IndyMac Bancorp Inc., the holding company for IndyMac Bank, has been struggling to raise capital as the housing slump deepens.
IndyMac had $32.01 billion in assets as of March 31.
A spokesman for the lender referred media queries to the FDIC.
The banking regulator said it closed IndyMac after customers began a run on the lender following the June 26 release of a letter by Sen. Charles Schumer, D-N.Y., urging several bank regulatory agencies that they take steps to prevent IndyMac's collapse.
In the 11 days that followed the letter's release, depositors took out more than $1.3 billion, regulators said.
In a statement Friday, Schumer said IndyMac's failure was due to long-standing practices by the bank, not recent events.
"If OTS had done its job as regulator and not let IndyMac's poor and loose lending practices continue, we wouldn't be where we are today," Schumer said. "Instead of pointing false fingers of blame, OTS should start doing its job to prevent future IndyMacs."
The FDIC planned to reopen the bank on Monday as IndyMac Federal Bank, FSB.
Deposits are insured up to $100,000 per depositor.
As of March 31, IndyMac had total deposits of $19.06 billion.
Some 10,000 depositors had funds in excess of the insured limit, for a total of $1 billion in potentially uninsured funds, the FDIC said.
Customers with uninsured deposits could begin making appointments to file a claim with the FDIC on Monday. The agency said it would pay unsecured depositors an advance dividend equal to half of the uninsured amount.
During a conference call with reporters, FDIC Chairman Sheila C. Bair said the agency would cover all insured deposits and then try to recover its costs by selling IndyMac's assets.
"We anticipate trying to market the institution as a whole bank," Bair said. "How much money we derive from that will depend on who gets paid what."
Holders of unsecured IndyMac debt may not fully recover their investment, Bair said.
"Generally if a creditor is secured, they are at the top of the claims priority," she said. "If they are unsecured, they're pretty low on the claims priority and probably will take some type of haircut with this, but we have not had a chance to do a thorough analysis to know ... how extensive those losses will be."
IndyMac spent the last two weeks trying to reassure customers that it was not near default.
On Monday, IndyMac announced it had stopped accepting new loan submissions and planned to slash 3,800 jobs, or more than half of its work force - the largest employee cuts in company history.
In the letter to shareholders, IndyMac Chairman and Chief Executive Michael W. Perry said the drastic measures were made in conjunction with banking regulators to improve the company's financial footing and "meet our mutual goal of keeping Indymac safe and sound through this crisis period."
The plan was supposed to generate roughly $5 billion to $10 billion per year of new loans backed by government-sponsored mortgage companies, Perry said at the time.
But the run on its deposits ultimately short-circuited the strategy, prompting regulators' action Friday.
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The secrets of tennis legend 
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See all 139 CommentsPosted by Marshall_Nee at 07:16 AM : Jul 13, 2008
Well said. We need to vote out radical left or right politiians who are controlled by corporations and get back to a government of, by and for the people. We need to let the rest of the world know that this administration doesn''t represent the will of the people. The people have not been adequately represented by our elected officials and that needs to change. Period!
If you have a low paying job then it stands to reason that you can have a new car and a 250,000 home with a swimming pool in the back yard.
The way I see it you have made your bed now you must sleep in it.
Every one wants a Government hand out! It is funny when I am in trouble and need help the Goverment says no help because you have to much income. I ask why they say that and they say you make .50 cents to much an hour so you do not qualify...Thanks Uncle Sam
Posted by eatech at 02:29 AM : Jul 13, 2008
I don''t know ANYONE who has lost their job because of the TERRIBLE Trade Agreements that are asking for a Hand Out. They just want a government that negotiates those deals for THEM, not for the rich and Corporations. When we ask AMERICAN Workers to Compete with 30 Cents a DAY in Wages, we aren''t doing the RIGHT thing PERIOD!! No those workers who now are working for HALF what they were earning when Sir Lies-A-Lot came to power aren''t looking or any hand out. They just want a fair shake. Sieg Heil Bush
Posted by vnveteran72 at 05:47 AM : Jul 13, 2008
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I wouldn''t trust them to do that properly. They''d find a way to screw it up and their customers would always be premature.
What a great strategy, targeted bank runs by the people. We should use this tactic as one of our weapons in our fight against the US aristocracy, which wasn''t supposed to exist in the first place.
OH NO! aome random poster who has been posting anti-Obama distortions and lies for days says something that contradicts what the major news sources say. I am exactly as concerned as I should be.
then you are looking at the wrong indicators. Because the economy is bad, scary bad, and not getting better.
If you have a low paying job then it stands to reason that you can have a new car and a 250,000 home with a swimming pool in the back yard.
The way I see it you have made your bed now you must sleep in it.
Every one wants a Government hand out! It is funny when I am in trouble and need help the Goverment says no help because you have to much income. I ask why they say that and they say you make .50 cents to much an hour so you do not qualify...Thanks Uncle Sam
So Chuck, if a Rhino(tm) bullet from a drive by comes through your window and turns your daughter''s head into quivering sushi, the police are at fault for not preventing it?
No, I would suggest that the bank management is at fault, and the assets of the CEO, and upper management, as well as the dividends of investors who voted for such practices, going bact to the day the policies were decided, be confiscated, and added to the money that will be used ridiculously to bail out the suckers who had more than the FDIC limit in their accounts.
Soon, even the "rich" will be slurpin'' down KoolAid from Obama''s stand.
I think I''ll just stick to an occasional day at the racetrack.
I haven''t however two neighbors and a relative of mine have. My wife lost her job and we are struggling. About to lose the only car we have. Wanna tell me again that everything is ok jacka ss
Interests rates are low, unemployment is low, and the devalued dollar has spurred foreign trade.
Unfortunately, it benefits some to make it appear that the sky is crashing down on our heads. It is not. The number of foreclosures is less than 1% of all mortgage holders. Go to the mall, restaurants, sporting events, concerts, they are all packed. Where are those people getting their money. Has anyone posting lost their home to foreclosure? In the case of Indy bank, Charles Schumer took it upon himself to usurp the bank''s management by screaming "fire" and forcing a run on the bank. Fear moves 3 times as fast as greed. Sit tight and wait it out.
yep
You don''t have a single clue.
Will Phil Gramm continue to tell us the basics of the economy is still sound? RePugnaCons have really f*cked sh*t up this time.
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