Banking regulators close IndyMac
 

and the beat goes on...

http://money.cnn.com/2008/07/11/news/companies/indymac_close.ap/index.htm?postversion=2008071118

The Office of Thrift Supervision shuts down mortgage lender IndyMac and transfers the operations to the Federal Deposit Insurance Corporation.

LOS ANGELES (AP) -- IndyMac Bank's assets were seized by federal regulators on Friday after succumbing to the pressures of tighter credit, tumbling home prices and rising foreclosures.

The Office of Thrift Supervision said it transferred IndyMac's (IMB) 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.

The bank is the largest regulated thrift to fail and the second largest financial institution to close in U.S. history, regulators said.

"This institution failed today due to a liquidity crisis," OTS Director John Reich said.

IndyMac had $32.01 billion in assets as of March 31.

Pasadena, Calif.-based IndyMac Bancorp Inc., the holding company for IndyMac Bank, has been struggling to raise capital as the housing slump deepens.

A spokesman for the lender did not immediately return an e-mail request for comment.

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.

The FDIC planned to reopen the bank on Monday as IndyMac Federal Bank, FSB. To top of page
First Published: July 11, 2008: 6:44 PM EDT

A guy on one of my projects was just enticed to come back to the FDIC as an inspector (a job he'd left). He's planning to be VERY busy.

It took me a bit by surprise - whoa - this is really happening. A run on a bank...whoa.

Is it really a run on a bank? I mean in my every-man terms that is when people drain an institution through withdraws. This isn't quite the same.

Yeah, it's really a run on the bank. People don't literally drain every penny from the bank, I don't think that is logistically possible, and a good portion of the population is always asleep at the switch.

But banks need to maintain certain debt/equity type ratios, etc., and if a bunch of people start taking out money, and deposits start to dry up, it's still a "run" on the bank, and it is what eventually causes them to be shut down.

My aunt and uncle have over $2 million at IndyMac!

I hope that is spread out between 20 different accounts. FDIC only insures up to $100,000 in each account.

actually, spreading it out among different accounts isn't enough. If one person has 10 accounts, with $100,000 in each, he is going to lose $900,000.

There are other ways to do it, though. They successfully went through this during the last round of bank failures a while back.

oy! I do not envy them...

How on earth does a person:

(1) amass $2M and
(2) not have enough sense to spread it between different investment vehicles and/or banks?

I swear, it's mind-blowing to me. Nothing against your relatives, but I can't fathom how people can value such astonishing amounts of money so little as to be so utterly foolish about where to put it. If I ever had 1/10 that amount, I'd have a professional financial planner advising me. No joke.

I don't mean to sound callous - hopefully they're able to preserve a lot of their savings. It's got to be a nightmare seeing one's nest egg evaporate (potentially) like that when one is older. . . Absolute nightmare scenario.

Maybe that's their chump change?

Yes I understand that their assets value plummeted making them insolvent and I understand that will "shut them down". My point was that I understood a "run on a bank" to be a situation where the customers lose faith in the bank and pull funds to the point they don't have enough liquid to accommodate.

Keep in mind here I'm not trying to educate you on how it is, rather on my understanding.

Aslo, regarding the's relatives you can see he alludes to the fact that they have it taken care of as the went through it fine before.

There's nothing foolish about it. It is all FDIC insured. They will get every penny out, they'll go to the bank on Monday (or Tuesday to avoid the crowd) and the FDIC will cut them a check for the full amount.

They've BTDT.

Their money is spread out among many investment vehicles (real estate, many banks). It's not their nest egg.

The only money they have lost, or not done well with, has been at the hand of "professional financial planners." They have found that when you put responsibility for your money in the hands of others, you don't do as well. I can't argue with their success - they are actually only high school educated, blue collar people with a lot of common sense (they are straight out of Millionaire Next Door).

Glad to hear. . . The way I was reading the account above was that they had $2M in one institution, which is playing Russian Roulette. Even a guy like me (with <1% of what your relatives have) knows that.

I just reread the story and see that customers did pull funds after Schumer's comments:

"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."


[lays down sword] :D

That is exactly what happened - Some idiot Senator sent out some public letter to the fed and the bank's customers started taking their money out.

From the LA Times:

"ndyMac, which once employed 10,000, fell prey to a classic run on the bank, and regulators singled out Sen. Charles E. Schumer (D-N.Y.) as having helped to fuel massive withdrawals. On June 26, Schumer said in letters to the FDIC, the OTS and two other federal agencies that IndyMac might have "serious problems" with its loan holdings.

"I am concerned that IndyMac's financial deterioration poses significant risks to both taxpayers and borrowers," he wrote. The bank "could face a failure if prescriptive measures are not taken quickly."

That public warning prompted depositors to pull $1.3 billion out of accounts between June 27 and Thursday.

"This institution failed today due to a liquidity crisis," John M. Reich, director of the OTS, said at a news conference Friday afternoon. "Although this institution was already in distress, the deposit run pushed IndyMac over the edge."

Schumer said in a statement that the cause of IndyMac's failure was "poor and loose lending practices" that should have been prevented by more active regulation. Later, a Schumer spokesman said: "Mr. Reich, a political appointee, should be spending less time playing politics and more time doing his job."
"

http://www.latimes.com/business/la-fi-indymac12-2008jul12,0,6071779.story