Saturday, July 12, 2008
IndyMac Bank Closed by OTS, FDIC Takes Over
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. All non-brokered insured deposit accounts have been transferred to IndyMac Federal Bank, F.S.B., Pasadena, CA ("assuming institution") a new FDIC-insured Federal Mutual Savings Bank. - FDIC Closing information for IndyMac
Turns out IndyMac was too small to merit a federal bailout, but not big enough to avoid getting shuttered.
Before we get into a more in-depth analysis of the closure, here's a little information for Indymac bank's account holders. There's nothing you need to do, or should do, if your individual account has less than $100,000 (or $200,000 for joint accounts and $250,000 for retirement accounts). The full amount will be available in your new account in the new IndyMac Federal Bank mentioned above. The new bank will reopen on Monday. If you want direct information from the FDIC about IndyMac and the status of your account, call 866-806-5919 anytime between 8 am and 8 pm. The Los Angeles Times has a detailed Q & A for IndyMac account holders.
And now, lets get down to why the OTS so hastily shut down the bank. On the face of it, the blame for the FDIC taking conservatorship of IndyMac Bank lies at Sen Schumer's feet. His letter, and the subsequent negative media coverage (including on this blog) panicked account holders and the elevated level of withdrawals never really gave the Bank's officials a chance to regroup. The Office of Thrift Supervision, in a statement, said that "The immediate cause of the closing was a deposit run that began and continued after the public release of a June 26 letter to the OTS and the FDIC from Senator Charles Schumer of New York. The letter expressed concerns about IndyMac's viability. In the following 11 business days, depositors withdrew more than $1.3 billion from their accounts."
But like I said in the previous post about Lehman rumors, the question is not who triggers the crash, or why. The question is - If the firm is in such a precarious state that a small event like a rumor or a letter from a Senator leads to a near collapse, or in this, an actual closure, then why blame the guy who lights the fuse? Its a tinderbox waiting to explode. So if you look at it one level deeper, the problems are (were) within Indymac. You can read all the background info about Indymac's problems here.
Now the FDIC will have to find a buyer for the bank's assets. But that's a secondary question right now. The immediate question is the downward pressure this will put on Fannie Mae and Freddie Mac, due to negative sentiment rippling from Pasadena to Wall Street. With regulators having shelved immediate plans for a bailout, Fannie and Freddie will have to face the music on the markets on Monday. And its not going to be pretty.
Turns out IndyMac was too small to merit a federal bailout, but not big enough to avoid getting shuttered.
Before we get into a more in-depth analysis of the closure, here's a little information for Indymac bank's account holders. There's nothing you need to do, or should do, if your individual account has less than $100,000 (or $200,000 for joint accounts and $250,000 for retirement accounts). The full amount will be available in your new account in the new IndyMac Federal Bank mentioned above. The new bank will reopen on Monday. If you want direct information from the FDIC about IndyMac and the status of your account, call 866-806-5919 anytime between 8 am and 8 pm. The Los Angeles Times has a detailed Q & A for IndyMac account holders.
And now, lets get down to why the OTS so hastily shut down the bank. On the face of it, the blame for the FDIC taking conservatorship of IndyMac Bank lies at Sen Schumer's feet. His letter, and the subsequent negative media coverage (including on this blog) panicked account holders and the elevated level of withdrawals never really gave the Bank's officials a chance to regroup. The Office of Thrift Supervision, in a statement, said that "The immediate cause of the closing was a deposit run that began and continued after the public release of a June 26 letter to the OTS and the FDIC from Senator Charles Schumer of New York. The letter expressed concerns about IndyMac's viability. In the following 11 business days, depositors withdrew more than $1.3 billion from their accounts."
But like I said in the previous post about Lehman rumors, the question is not who triggers the crash, or why. The question is - If the firm is in such a precarious state that a small event like a rumor or a letter from a Senator leads to a near collapse, or in this, an actual closure, then why blame the guy who lights the fuse? Its a tinderbox waiting to explode. So if you look at it one level deeper, the problems are (were) within Indymac. You can read all the background info about Indymac's problems here.
Now the FDIC will have to find a buyer for the bank's assets. But that's a secondary question right now. The immediate question is the downward pressure this will put on Fannie Mae and Freddie Mac, due to negative sentiment rippling from Pasadena to Wall Street. With regulators having shelved immediate plans for a bailout, Fannie and Freddie will have to face the music on the markets on Monday. And its not going to be pretty.
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