FDIC Closes IndyMac Bank

[OhSoClose]

Quote:

Originally Posted by ChrisC When I hear of individuals or organizations (particularly nonprofits) with uninsured amounts in banks or credit unions, I always cringe.

Amen.

NCUA once had to deny an insurance claim submitted by an organization of nuns on a multi-million dollar account at a failed credit union. I know my odds of ever getting to heaven likely diminished that day.

[UncleHoney]

Quote:

Originally Posted by FinanceDude I often wodner about custodial accounts. maybe $100K per kid??

Sorry, I missed this post early this morning. Here a link to the NCUA insurance coverage that I follow.

http://bmifcu.org/pdfs/NCUASpecialBulletin.pdf

[OAG]

Quote:

Originally Posted by OhSoClose Amen. NCUA once had to deny an insurance claim submitted by an organization of nuns on a multi-million dollar account at a failed credit union. I know my odds of ever getting to heaven likely diminished that day.

Details? Be specific or is this just a rumor you can not substantiate which is how these some of these thing be come "fact".

[ChrisC]

Quote:

Originally Posted by OAG Details? Be specific or is this just a rumor you can not substantiate which is how these some of these thing be come "fact".

If OhSoClose works for NCUA, as he claimed, or the credit union in which this occurred, his disclosure of this information might be contrary to the Federal Privacy Act or the Bank Privacy Act, unless this information is readily available to the public. His basic point was a particular charitable or religious organization had uninsured accounts at a credit union; this is not surprising. At IndyMac, the FDIC press release says it projects around $1 billion in uninsured accounts -- these can just all be individuals but likely include nonprofits like Churches, Social and Fraternal Organizations, Municipalities/Political Subdivisions, Homeowners Associations, Trust and Escrow Accounts (like Lawyer IOLTA/Client Accounts), etc.

Google Freedom National Bank, a small bank in Harlem founded by Jackie Robinson that failed in the 1990's, and you will note the uproar that ensued when a number of charitable organizations, including Churches, had accounts that were uninsured and unprotected when that bank failed. The treatment of uninsured depositors of Freedom National Bank, when contrasted with the treatment of uninsured depositors at Bank of New England (where uninsured depositors were fully protected), lead Congress to enact changes in how "uninsured depositors" get treated in all banks, including those that are "too big too fail." In the past, uninsured depositors in mega-banks would routinely be protected in deals structured by the FDIC when those banks were resolved by the FDIC -- not the case anymore, as IndyMac also demonstrates.

[ERD50]

Quote:

Originally Posted by ChrisC Google Freedom National Bank, a small bank in Harlem founded by Jackie Robinson that failed in the 1990's, and you will note the uproar that ensued when a number of charitable organizations, including Churches, had accounts that were uninsured and unprotected when that bank failed.

Hmmm, makes we wonder where our local govt, school district, and local church keep their money?

They might all be in debt, but they still have working cash reserves on hand, probably way over $100K.

-ERD50

[OhSoClose]

Quote:

Originally Posted by ChrisC If OhSoClose works for NCUA, as he claimed, or the credit union in which this occurred, his disclosure of this information might be contrary to the Federal Privacy Act or the Bank Privacy Act, unless this information is readily available to the public. His basic point was a particular charitable or religious organization had uninsured accounts at a credit union; this is not surprising. At IndyMac, the FDIC press release says it projects around $1 billion in uninsured accounts -- these can just all be individuals but likely include nonprofits like Churches, Social and Fraternal Organizations, Municipalities/Political Subdivisions, Homeowners Associations, Trust and Escrow Accounts (like Lawyer IOLTA/Client Accounts), etc. Google Freedom National Bank, a small bank in Harlem founded by Jackie Robinson that failed in the 1990's, and you will note the uproar that ensued when a number of charitable organizations, including Churches, had accounts that were uninsured and unprotected when that bank failed. The treatment of uninsured depositors of Freedom National Bank, when contrasted with the treatment of uninsured depositors at Bank of New England (where uninsured depositors were fully protected), lead Congress to enact changes in how "uninsured depositors" get treated in all banks, including those that are "too big too fail." In the past, uninsured depositors in mega-banks would routinely be protected in deals structured by the FDIC when those banks were resolved by the FDIC -- not the case anymore, as IndyMac also demonstrates.

The "nun" case I made reference to happened long ago. But ChrisC is right, the information OAG wants is not publicly available. The religious organization could have made its claim public by filing a lawsuit against NCUA after NCUA denied the insruance claim, but it chose not to file a lawsuit. The important point is that folks who run organizations seem to be the most likely to overlook the limits of federal insurance and to put huge deposits at risk, and that is particularly unfortunate when the organization is a charity or nonprofit

fyi, Chris, NCUA does not have the authority to establish "bridge" credit unions, so the IndyMac recievership is proceeding along a different tack than would a similar credit union failure.