from
(snip)"LOS ANGELES (July 11) - IndyMac Bank's assets were seized by federal regulators on Friday after the mortgage lender succumbed to the pressures of tighter credit, tumbling home prices and rising foreclosures. The bank is the largest regulated thrift to fail and the second-largest financial institution to close in U.S. history, regulators said.
The Office of Thrift Supervision said it transferred IndyMac's 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. "(snip)
(snip)The FDIC estimated that its takeover of IndyMac would cost between $4 billion and $8 billion."(snip)
(snip)"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.
In a statement Friday, Schumer said IndyMac's failure was due to long-standing practices by the bank, not recent events.
"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," Schumer said. "Instead of pointing false fingers of blame, OTS should start doing its job to prevent future IndyMacs."
The FDIC planned to reopen the bank on Monday as IndyMac Federal Bank, FSB.
Deposits are insured up to $100,000 per depositor.
As of March 31, IndyMac had total deposits of $19.06 billion.
Some 10,000 depositors had funds in excess of the insured limit, for a total of $1 billion in potentially uninsured funds, the FDIC said.
Customers with uninsured deposits could begin making appointments to file a claim with the FDIC on Monday. The agency said it would pay unsecured depositors an advance dividend equal to half of the uninsured amount.
During a conference call with reporters, FDIC Chairman Sheila C. Bair said the agency would cover all insured deposits and then try to recover its costs by selling IndyMac's assets.
"We anticipate trying to market the institution as a whole bank," Bair said. "How much money we derive from that will depend on who gets paid what."
Holders of unsecured IndyMac debt may not fully recover their investment, Bair said.
"Generally if a creditor is secured, they are at the top of the claims priority," she said. "If they are unsecured, they're pretty low on the claims priority and probably will take some type of haircut with this, but we have not had a chance to do a thorough analysis to know ... how extensive those losses will be."
IndyMac spent the last two weeks trying to reassure customers that it was not near default.
On Monday, IndyMac announced it had stopped accepting new loan submissions and planned to slash 3,800 jobs, or more than half of its work force - the largest employee cuts in company history."(snip)
- the news blurb says that the IndyMac takeover will cost the FDIC somewhere between 4 and 8 billion in FDIC insurance payouts to IndyMac depositors. However, what the news blurb does NOT say is that FDIC's total available reserves prior to the IndyMac takeover only amount to some 50 billion dollars or so. As such, the FDIC could only handle perhaps 10 additional bank failures on the scale of IndyMac before becoming insolvent itself !!!
- the news blurb says that unsecured creditors are likely to take a haircut. In plain terms, this means that IndyMac stockholders will take a huge decline in their stock price, and counterparties to IndyMac bonds / CDO's ( meaning other banks, FMN and FRE, institutional investors) are likely to be stiffed in the short term.
- unlike financially troubled Bear Stearns, Countrywide, and some smaller troubled financial institutions, it was apparently not possible for a 'shotgun marriage' to be arranged in the case of IndyMac. In the absence of a 'shotgun marriage', where a different, larger financial institution acquires the troubled institution and takes over responsibility for all customer accounts, the only resources available to IndyMac customers are FDIC insurance funds - providing that the customer accounts were of a type that qualified for FDIC insurance. Per the news story, the FDIC is taking applications and considering extending FDIC payouts to non-insured accounts at a rate of 50 cents on the dollar ... but there is no guarantee the FDIC will actually do this.
- whereas IndyMac (and many other banks in similar straits) had racked up a collection of foreclosed homes that are essentially unmarketable at any sort of price that could offset the bank's original investment, the FDIC itself now begins to rack up a collection of foreclosed banks that are essentially unmarketable at any sort of price that could offset the FDIC's obligations to insured bank customers.
- per the news blurb, the FDIC is currently limiting the access of IndyMac customers to their deposited money ... via ATM transactions (subject to pre-existing $500 per day transaction limits or whatever) and via checking account transactions (subject to pre-existing checking account balance). There is no guarantee that the FDIC is going to allow customers to make unrestricted withdrawls from IndyMac savings accounts / unrestricted transfers from IndyMac savings accounts to checking accounts / unrestricted cashing in of IndyMac CD's prior to their maturity date etc. without forcing customers to wait until FDIC insurance claims are processed first. In other words, IndyMac now represents the first example of 'banking system liquidity problems' reaching all the way down to the retail bank customers !
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