In the biggest bank failure of the housing downturn to date, federal banking regulators today closed IndyMac Bank FSB, naming the Federal Deposit Insurance Corp. as conservator.
The FDIC said it will transfer insured deposits and "substantially all the assets" of IndyMac Bank, to a newly created successor, IndyMac Federal Bank, which will be operated by the FDIC.
Insured depositors and borrowers will automatically become customers of IndyMac Federal, FSB and will continue to have uninterrupted customer service and access to their funds by ATM, debit cards and writing checks. Depositors of IndyMac Federal Bank FSB will have no access to online and phone banking services this weekend, but will regain access to them on Monday.
IndyMac was one of the nation’s largest independent mortgage lenders, and had been hard hit by delinquencies and foreclosures. Parent company IndyMac Bancorp Inc. announced Monday that it was no longer considered "well capitalized" by regulators and had stopped making most mortgage loans (see story).
In a statement, OTS Director John Reich said the immediate cause of the closing of IndyMac Bank FSB was a run on deposits that began when a June 26 letter Sen. Charles Schumer, D-N.Y., sent to federal bank regulators voicing concerns about the thrift’s "financial deterioration" was made public. Schumer said IndyMac posed "significant risks to both taxpayers and borrowers" (see story).
In the 11 business days following the public release the letter, Reich said depositors withdrew more than $1.3 billion from their accounts.
“This institution failed today due to a liquidity crisis,” Reich said. “Although this institution was already in distress, I am troubled by any interference in the regulatory process.”
OTS said IndyMac is the largest thrift it regulates to fail and according to FDIC data is the second largest financial institution to close in U.S. history.
IndyMac Bank, FSB had total assets of $32.01 billion and total deposits of $19.06 billion as of March 31, including about $1 billion of potentially uninsured deposits held by approximately 10,000 depositors. The FDIC will begin contacting customers with uninsured deposits to arrange an appointment with an FDIC claims agent by Monday.
The FDIC will pay uninsured depositors an advance dividend equal to 50 percent of the uninsured amount. Based on preliminary analysis, the estimated cost of the resolution to the Deposit Insurance Fund is between $4 billion and $8 billion.
In a statement, American Bankers Association president Edward Yingling called it "a sad day for IndyMac" but said insured depositors "should know that their money is safe. The FDIC insurance fund is huge, with more than $52 billion in assets to protect bank depositors. In this year alone, the fund will add an additional $5 billion from assessments on banks and interest earnings."
The FDIC said IndyMac Bank is the fifth FDIC-insured failure of the year. The last FDIC-insured failure in California was the Southern Pacific Bank, Torrance, on Feb. 7, 2003.
The FDIC has established a toll-free number for customers of IndyMac Federal Bank, FSB. The toll-free number is 1-866-806-5919 and will operate today from 3 p.m. to 9 p.m. (PDT), and then daily from 8 a.m. to 8 p.m. thereafter, except Sunday, July 13, when the hours will be 8 a.m. to 6 p.m. Customers also may visit the FDIC’s Web site at http://www.fdic.gov/bank/individual/failed/IndyMac.html for further information.
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