topic Re: Feds shut down Indymac Bank in Credit in the News

Feds shut down Indymac Bank

MattH — Sat, 12 Jul 2008 03:40:57 GMT

From the FDIC web site:
http://www.fdic.gov/bank/individual/failed/IndyMac.html

When they close a bank they usually do so on a Friday afternoon because that gives them all weekend to prepare for its reopening on Monday.

Bloomberg describes this as the second largest financial institution ever to be shut down by the Feds (the biggest was Continental Illinois back in 1984) and quotes Senator Charles Schumer as saying "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."

http://www.bloomberg.com/apps/news?pid=20601103&sid=atrd9_l.GrL8&refer=us

Re: Feds shut down Indymac Bank

haulingthescoreup — Sat, 12 Jul 2008 13:03:15 GMT

WOW!!! A bank run, followed by a bank failure. Shades of George Bailey.

Interesting chicken-and-egg argument between the Senator and the regulators. So did Schumer really trigger the run, or is OTS just harrumphing and trying to convince people that everything would have been fine, if he'd just stayed out of it?

Re: Feds shut down Indymac Bank

marty56 — Sat, 12 Jul 2008 14:36:33 GMT

Nice shot Schumer. Please start talking about BofA pretty please.

Re: Feds shut down Indymac Bank

Anonymous — Sat, 12 Jul 2008 15:12:17 GMT

With 1 billion in uninsured deposits -

Advice- to everyone pull/move uninsured deposits

This will NOT be the only bank to go under- I expect 50 to 600 banks to go under in the next 90 days.

Re: Feds shut down Indymac Bank

Anonymous — Sat, 12 Jul 2008 15:13:16 GMT

IMO- it was already failing

haulingthescoreup wrote:
WOW!!! A bank run, followed by a bank failure. Shades of George Bailey.

Interesting chicken-and-egg argument between the Senator and the regulators. So did Schumer really trigger the run, or is OTS just harrumphing and trying to convince people that everything would have been fine, if he'd just stayed out of it?

Re: Feds shut down Indymac Bank

haulingthescoreup — Sat, 12 Jul 2008 15:22:41 GMT

Absolutely, but the actual closure was triggered when the bank had to report that its cash reserves were too low. And that happened when there was a panic and they were hit by withdrawals.

I see a good chance of this closure triggering similar panics. Might see some enforced bank holidays coming in the next week or two if dominos start falling.

Re: Feds shut down Indymac Bank

MattH — Sat, 12 Jul 2008 20:37:37 GMT

@Anonymous wrote:
With 1 billion in uninsured deposits -

Advice to everyone pull/move uninsured deposits

Excellent advice, nobody should have uninsured deposits. If you have less than the FDIC limit on deposit, then you are covered. If not then you should spread the money around so no single institution has too much of it. Many banks offer a simple way to have a much larger CD and still be fully covered by the FDIC called CDARS. As described in the article below, this service basically automates the process of distributing the money among multiple participating banks so that no single bank holds too much of it:

http://www.bankrate.com/brm/news/sav/20030820a1.asp

Also, folks should be aware that although nearly all banks/S&Ls are insured by FDIC, and many Credit Unions are insured by a similar Federal institution, some Credit Unions are insured through a private company. This is probably safe because Credit Unions have generally not been as aggressive as banks in seeking higher investment returns during the mortgage boom, but if you do not know who insures your money then it behooves you to find out.

And if you live outside the USA then you should certainly check how safe your money is, since not all countries have such iron-clad protections as we have in the USA! The UK until recently did not, forcing them to nationalize Northern Rock at considerable cost to taxpayers when it collapsed.

Re: Feds shut down Indymac Bank

MattH — Sat, 12 Jul 2008 20:47:14 GMT

@MattH wrote:

@Anonymous wrote:
With 1 billion in uninsured deposits -

Advice to everyone pull/move uninsured deposits

Excellent advice, nobody should have uninsured deposits. If you have less than the FDIC limit on deposit, then you are covered. If not then you should spread the money around so no single institution has too much of it. Many banks offer a simple way to have a much larger CD and still be fully covered by the FDIC called CDARS. As described in the article below, this service basically automates the process of distributing the money among multiple participating banks so that no single bank holds too much of it:

http://www.bankrate.com/brm/news/sav/20030820a1.asp

Also, folks should be aware that although nearly all banks/S&Ls are insured by FDIC, and many Credit Unions are insured by a similar Federal institution, some Credit Unions are insured through a private company. This is probably safe because Credit Unions have generally not been as aggressive as banks in seeking higher investment returns during the mortgage boom, but if you do not know who insures your money then it behooves you to find out.

And if you live outside the USA then you should certainly check how safe your money is, since not all countries have such iron-clad protections as we have in the USA! The UK until recently did not, forcing them to nationalize Northern Rock at considerable cost to taxpayers when it collapsed.

The FDIC web site has an interesting, though rather dry and technical, article about the regulatory implications of deposit brokers and CDARS here:

http://www.fdic.gov/bank/analytical/banking/2006sep/article1/index.html

One interesting point of which I had not been aware is that in 1991 Congress passed a law that says only "well capitalized" banks can accept funds from deposit brokers, in order to reduce the risk of a weak bank pulling in large amounts of capital by offering high interest and then leaving the FDIC holding the bag if it collapses.

Re: Feds shut down Indymac Bank

llecs — Sun, 13 Jul 2008 00:36:11 GMT

DW's dad has his mortgage with IndyMac. I wonder how that would impact things. At least he has a flawless history with them so we don't need to worry about unanswered GWs. His rate is low too.

Re: Feds shut down Indymac Bank

MattH — Sun, 13 Jul 2008 00:59:16 GMT

@llecs wrote:
DW's dad has his mortgage with IndyMac. I wonder how that would impact things. At least he has a flawless history with them so we don't need to worry about unanswered GWs. His rate is low too.

If he is current on the mortgage, probably it will get sold to some other company but the terms cannot change so the only effect on him will be a new address for sending the payments. He should begin saving every scrap of paper now in his possession or arriving in future regarding that mortgage just in case the records get mixed up in the transfer to a new company and he needs documentation to back him up. My own mortgage got bought from Washington Mutual by Wells Fargo a couple of years ago and I've had zero problems, the Wells Fargo website even lets me pull up my transaction history from when WAMU had my loan. Because I'm very detail-oriented I maintain my own spreadsheet of interest and principal calculations and regularly compare my numbers to theirs (there were differences of a few cents so I reverse-engineered their rounding rules to make my numbers agree with theirs exactly to the penny, like I said I am extremely detail-oriented).

Being highly detail-oriented is a trait that serves me well in my work analyzing data for the R&D division of a pharmaceutical company.

Re: Feds shut down Indymac Bank

Anonymous — Sat, 26 Jul 2008 05:23:56 GMT

Federal regulators close First National Bank of Arizona

http://www.azcentral.com/business/articles/2008/07/25/20080725biz-FNBA-ON.html

Arizonans with deposits at failed First National Bank probably won't notice any changes in service when the institution opens as Mutual of Omaha Bank on Monday.

Banking regulators closed the Scottsdale-based company late today. That made First National Bank the sixth bank failure of 2008 and the first involving an Arizona institution since 2002 — and just the second Arizona failure in the past 16 years. First National was the victim of problem loans and the lingering real estate slump.

Timothy wrote:

With 1 billion in uninsured deposits -

Advice- to everyone pull/move uninsured deposits

This will NOT be the only bank to go under- I expect 50 to 600 banks to go under in the next 90 days.