FDIC Closes IndyMac Bank

[Helena]

[FONT=arial, helvetica, sans-serif]

On July 11, 2008, IndyMac Bank, F.S.B., Pasadena, CA was closed by the Office of Thrift Supervision (OTS) and the Federal Deposit Insurance Corporation (FDIC) was named Conservator.

FDIC: Failed Bank Information - Bank Closing Information for IndyMac Bank, F.S.B., Pasadena, CA



[/FONT]IndyMac Seized by U.S. Regulators Amid Cash Crunch

Bloomberg.com: U.S.


~

 

[Notmuchlonger]

Never heard of indymac? Big deal or something?

 

[Helena]

Never heard of indymac? Big deal or something?

From the Bloomberg article above:

IndyMac becomes the largest OTS-regulated savings and loan to fail and second-biggest financial institution to close behind Continental Illinois in 1984, according to the FDIC.

 

[Notmuchlonger]

This is exciting!

 

[Dawg52]

This is exciting!

Exciting for my Mother, maybe. She has a cd with them through her brokerage account. But less than the 100k limit so we will get to see how long it takes to settle. Broker tipped me off the other day that this was a possibility. Said it will pay accrued interest as well.

 

[copyright1997reloaded]

Never heard of indymac? Big deal or something?

From the FDIC:
"IndyMac Bank, FSB had total assets of $32.01 billion and total deposits of $19.06 billion as of March 31, 2008."

And more interesting:
"As conservator, the FDIC will operate IndyMac Federal Bank, FSB to maximize the value of the institution for a future sale and to maintain banking services in the communities formerly served by IndyMac Bank, F.S.B."

which means they didn't just have another bank (at least not yet) take over the asset base.

Finally, if folks have assets over the FDIC limit:
"[FONT=arial, helvetica, sans-serif]If it is determined that you have uninsured funds, the FDIC will generate and mail to you a Receiver Certificate. This certificate entitles you to share proportionately in any funds recovered through the disposal of the assets of IndyMac Bank, F.S.B. This means that you will eventually recover some of your uninsured funds. [FONT=Arial, Helvetica] The FDIC declared a 50% advance dividend for uninsured deposits."[/FONT][/FONT]

 

[Helena]

Also from the Bloomberg article:


After peaking at $50.11 on May 8, 2006, IndyMac shares lost 87 percent
of their value in 2007 and another 95 percent this year.

The stock fell 3 cents to 28 cents at 4 p.m. New York time today.

 

[Frugality_of_Apathy]

Finally, if folks have assets over the FDIC limit:
"[FONT=arial, helvetica, sans-serif]If it is determined that you have uninsured funds, the FDIC will generate and mail to you a Receiver Certificate. This certificate entitles you to share proportionately in any funds recovered through the disposal of the assets of IndyMac Bank, F.S.B. This means that you will eventually recover some of your uninsured funds. [FONT=Arial, Helvetica] The FDIC declared a 50% advance dividend for uninsured deposits."[/FONT][/FONT]

So anyone that had $1,000,000 in Indybank just lost up to $450,000 to the miracle of fractional reserve banking?

 

[Notmuchlonger]

So anyone that had $1,000,000 in Indybank just lost up to $450,000 to the miracle of fractional reserve banking?

Cant fix stupid

Crap that was insensitive.

How about that's natural selection at work.

 

[REWahoo]

So anyone that had $1,000,000 in Indybank just lost up to $450,000 to the miracle of fractional reserve banking?

And to the stupidity of not understanding or of ignoring FDIC limits...

 

[copyright1997reloaded]

So anyone that had $1,000,000 in Indybank just lost up to $450,000 to the miracle of fractional reserve banking?

No, not yet. It only says you will immediately (well, on Monday) get access to the $100k insured plus 50% of the 900k uninsured. So, you would get at least 550k of the 1M back.

The rest depends upon how well the FDIC does with the remaining assets. I would assume there would be at least some, otherwise they wouldn't have felt comfortable giving the 50% back now...

[I just noticed you said "lost up to"...well, worse case yes.]

 

[jazz4cash]

Hmm.....what about this little detail.........

IndyMac came under fire last month from U.S. Senator Charles Schumer, who said lax lending standards and deposits purchased from third parties left it on the brink of failure. In the 11 business days after Schumer explained his concerns in a June 26 letter, depositors withdrew more than $1.3 billion, the OTS said.

 

[copyright1997reloaded]

And to the stupidity of not understanding or of ignoring FDIC limits...

Yep, even at a place like PenFed I've been careful to stay close to the NCUA limits.

 

[copyright1997reloaded]

Hmm.....what about this little detail.........

IndyMac came under fire last month from U.S. Senator Charles Schumer, who said lax lending standards and deposits purchased from third parties left it on the brink of failure. In the 11 business days after Schumer explained his concerns in a June 26 letter, depositors withdrew more than $1.3 billion, the OTS said.

Wow. And From the WSJ:

The collapse is expected to cost the Federal Deposit Insurance Corp. between $4 billion and $8 billion, potentially wiping out more than 10% of the FDIC's $53 billion deposit-insurance fund. (emphasis mine)and

The director of the Office of Thrift Supervision, John Reich, blamed IndyMac's failure on comments made in late June by Sen. Charles Schumer (D., N.Y.), who sent a letter to the regulator raising concerns about the bank's solvency. In the following 11 days, spooked depositors withdrew a total of $1.3 billion. Mr. Reich said Sen. Schumer gave the bank a "heart attack."
"Would the institution have failed without the deposit run?" Mr. Reich asked reporters. "We'll never know the answer to that question."

 

[soupcxan]

After the market closed, the shares are trading at only $0.10, so you could buy the bank for <$10MM and then get $32B in assets. Only downside is all the liabilities that come with it, but I'm sure the FDIC would cut you a deal...

 

[Texas Proud]

Having gone through one of these before.... the FDIC usually will run the bank to see what it really has... sometimes a few weeks, sometimes a few months... then they will put it up for bid... trying to slice and dice it so they can get maximum value...


Indymac IIRC did mostly mortgages... the packaged them up and sold on the open market.... so there are some of my old buddies who are now worried about who will service these loans if nobody is interested in buying the service rights.... not a pretty picture... I went through it once....

Probably not the only one that will go under either... interest rates are down and mortgages are still going under...

 

[DblDoc]

And to the stupidity of not understanding or of ignoring FDIC limits...

I heard an estimate of $1 billion in accounts exceeding the FDIC limits

DD

 

[haha]

I heard an estimate of $1 billion in accounts exceeding the FDIC limits

DD

This is astonishing as this bank has been struggling for months with the stock having lost most of its value. Why would anyone take chances here for almost zero extra return?

Ha

 

[OAG]

So we see the OTC in action Friday afternoon (post 4 PM EST) closing and reopening as something on Monday morning (post 9 AM EST). Next week may be the time that the two biggest Mortgage institutions go; although everyone in the Government says no "they are fine". If the stock price reaches 0 or very close that what happens? We are running out of institutions to take them over? Maybe the China Sovereign Fund? Iraq Oil Fund? Saudi? Looks like all that Oil money will be coming back!

 

[UncleHoney]

I wonder how many depositors were ever warned by the bank that they had excess funds deposited that may not ever be replaced by the FDIC if the bank went belly up. I'll bet IndyMac never turned away anyone's deposits.

Today's typical computer savvy 15 year old could probably program the bank's computer to red-flag deposits exceeding FDIC limits. The kid probably wouldn't even have to go to the bank to do it, just hack-in from the outside.

 

[Trek]

IndyMac sounds like something you'd order at the drive-thru.

 

[UncleHoney]

IndyMac sounds like something you'd order at the drive-thru.

Yep, all you have to is call ahead, tell them how much you want, and then glide through the pay booth and pitch your IOU in the hopper. Then proceed to the pickup window and snatch your bag of cash without even stopping.

If you try it today, you better check the bag before you hit the road. It may be full of rocks.

 

[ronin]

Found out when I tried to transfer funds into my checking account to cover a check to a contractor for some work being done. Nasty suprise but not totally unexpected. All our accounts, MM, CDs, are titled to be under the 100k limit. So the bank is back Monday and personal liquidity crisis subsides.

Indy was the largest S&L in Southern California. They had great savings rates and excellent service for a long time. Had my mortgage with them. Never a problem. Watched with some trepidation the slow motion train wreck and chose not to bail with the rest of the lemmings a few weeks ago. Will look for another institution to service my financial needs next week. Thank God for FDIC. No bank panic here. Minor inconvenience.

 

[copyright1997reloaded]

Found out when I tried to transfer funds into my checking account to cover a check to a contractor for some work being done. Nasty suprise but not totally unexpected. All our accounts, MM, CDs, are titled to be under the 100k limit. So the bank is back Monday and personal liquidity crisis subsides.

From the FDIC page:
[FONT=arial, helvetica, sans-serif]"Principal and interest on insured accounts, through July 11, 2008, are fully insured by the FDIC, up to the insurance limit of $100,000. You will receive full payment for your insured account. Certain entitlements and different types of accounts can be insured for more than the $100,000 limit. IRA funds are insured separately from other types of accounts, up to a $250,000 limit.
All accounts that exceed the $100,000 insurance limit, and/or all accounts that appear to be related and exceed this limit, are reviewed by the FDIC to determine their ownership and insurance coverage. If you think you might have uninsured deposits you should call the FDIC Call Center to arrange for a telephone interview with a Claims Agent at 866-806-5919."




It is the phrasing in bold (my emphasis) that I have also seen on other bank failures that has made me somewhat hesitant to go beyond the simple 100k limit, even with various titling options such as POD and joint account designations. What this tells me is that they would eventually straighten it out, but in the meantime some of my funds might be tied up.

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[ziggy29]

So anyone that had $1,000,000 in Indybank just lost up to $450,000 to the miracle of fractional reserve banking?

Worst case, yes. Which goes to show why most of us here stress the need to spread your money around to remain under full insurance limits.