Indymac Bank Closed

[scfr]

FDIC: Press Releases - PR-56-2008 7/11/2008

This one hits a bit close to home for me, because I used to have money at this bank. We closed our account awhile back, when we saw their Bankrate Safe & Sound rating plummet. (I know, I know ... some of you think those ratings mean nothing. Their value can be debated, but as far as I'm concerned they're better than nothing.)

If anyone still has money with Indymac, I really hope you will share your experience dealing with the FDIC to access your funds, as it is something many of us on this board are really interested in. Specifically: How long did it take you to get your hands on your money? Did you really get uninterrupted access to your funds, as stated in the FDIC press release?

[MoneyenoM]

I really want to know too. I still have money in CD (due in September). Can anyone tell me what to do?

Thanks

[scfr]

I'm sorry to hear that, MoneyenoM. Thank goodness for FDIC insurance, eh? If you click on the link in my original post, you'll find a toll free number you can call. If there is a branch near you, you could also go there to see what you can find out. I have no idea whether they will have you take your money out now or whether they will make you wait until maturity (September). These are uncharted waters for all of us. Good luck to you, and please let us know how it goes.

[jIM_Ohio]

Based on preliminary analysis, the estimated cost of the resolution to the Deposit Insurance Fund is between $4 and $8 billion. IndyMac Bank, F.S.B. is the fifth FDIC-insured failure of the year. The last FDIC-insured failure in California was the Southern Pacific Bank, Torrance, on February 7, 2003.

I think this is just the beginning.

[scfr]

I think this is just the beginning.

I couldn't agree more. Thank goodness the FDIC did some advance prep in expectation of this ... Let's hope it was enough.
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[MoneyenoM]

Thanks scfr for the link above. I agreed with you Jim.

FDIC agent told me that I had to wait until maturity (September); then I could take it out. All depositors are insured ($100,000 limit). Feel relieved now.

By the way, bank name has changed to IndyMac Federal Bank, F.S.B. (IndyMac Federal Bank).

[banditfist]

Yes, FDI put it into conservatorship and rechartered is as IndyMac Federal Bank. From what I am hearing, they have $2.9 billion in deposits that are uninsured by FDIC. I think that FDIC may make payments of up to 50% on them. They should get ZERO for being stupid and not staying below $100k. FDIC should be beaten for allowing IndyMac for raising their intest rates so much to attract new deposits when they were already insolvent.
This is going to put a big dent in FDIC's balance sheet. Couple more and it will be the taxpayer bailing banks out again. Oops, we are already on the hook for $29 billion for Bear Sterns.

[scfr]

From what I am hearing, they have $2.9 billion in deposits that are uninsured by FDIC. I think that FDIC may make payments of up to 50% on them. They should get ZERO for being stupid and not staying below $100k.

I have to wonder how many of the uninsured deposits are business accounts. Imagine a large employer trying to not go over the $100K FDIC limit ... That would be impossible ... They'd have to have little accounts spread out all over the place. Accounting nightmare. If they recouped ZERO, then think of the ripple effect to the economy when the employees of those large entities suddenly didn't get their paychecks. How would you feel if suddenly you couldn't get paid because your employer's bank account was wiped out?


MoneyenoM - I'm glad to hear you were able to get in touch with an FDIC agent to get the information you needed so quickly.

[jIM_Ohio]

FDIC should be beaten for allowing IndyMac for raising their intest rates so much to attract new deposits when they were already insolvent.

This is a basic banking technique and is needed... I learned this in High School economics.

Banks must have 20% (or some percentage) of their loans as cash on hand. If something goes awry- maybe the loan balanced become larger or their is a raid on the deposits, then the bank needs to do one of two things

a) clear loans off balance sheet
b) raise cash

the obvious way to raise cash is to offer high interest savings accounts.

Whether the bank was insolvent or not, they needed to raise cash based on these margin requirements for lending money. These precautions were added to the banking system to preserve liquidity after the great depression.

One reason WAMU (a popular refinance company during the real estate bubble) offered such good money market and CD rates is because they offered a lot of loans. To loan that money out, they needed cash on hand, so they offered high savings rates to other customers so they could lend that money out to different customers.

[Ima saver]

If you have an account in joint names, you can have up to $200,000 fdic insured. I just roll mine over (c.d's) but now i am going to start taking out the interest next time one comes due.

[banditfist]

I have to wonder how many of the uninsured deposits are business accounts. Imagine a large employer trying to not go over the $100K FDIC limit ... That would be impossible ... They'd have to have little accounts spread out all over the place. Accounting nightmare. If they recouped ZERO, then think of the ripple effect to the economy when the employees of those large entities suddenly didn't get their paychecks. How would you feel if suddenly you couldn't get paid because your employer's bank account was wiped out?


MoneyenoM - I'm glad to hear you were able to get in touch with an FDIC agent to get the information you needed so quickly.

How many business are actually not in debt and use credit lines to fund their operations? Most, if not all.

This is a basic banking technique and is needed... I learned this in High School economics.

Banks must have 20% (or some percentage) of their loans as cash on hand. If something goes awry- maybe the loan balanced become larger or their is a raid on the deposits, then the bank needs to do one of two things

a) clear loans off balance sheet
b) raise cash

the obvious way to raise cash is to offer high interest savings accounts.

Whether the bank was insolvent or not, they needed to raise cash based on these margin requirements for lending money. These precautions were added to the banking system to preserve liquidity after the great depression.

One reason WAMU (a popular refinance company during the real estate bubble) offered such good money market and CD rates is because they offered a lot of loans. To loan that money out, they needed cash on hand, so they offered high savings rates to other customers so they could lend that money out to different customers.

Glad you brought up off balance sheet assets. Level 3 assets are nothing short of fraud throughout the financial industry. It is allowed by the Fed, SEC, and the Treasury. That certainly does not make it right. In my brokerage accounts, every night...EVERY NIGHT, I have to meet margin requirements. My assets are marked-to-market, and if I don't meet the margin requirements, then I have to sell them immediately at the market price. So, if a bank has an asset that is sold in the market and gets no-bid, then the asset is worth zero.

Don't even try to use the regulation that banks have to meet reserve requirements. Your high school also taught you wrong. It is a 10% reserve requirement, no 20%. Bank of America and several other banks are all working under waivers of the reserve requirement regulations.

What you are missing is that the FDIC is responsible for $100k per individual account. So, they need to be regulating (looking at the books and the crap loans) that the institutions under their protection. The FDIC has a very limited purse to pay for the overall accounts that they insure. After that, it is the US taxpayer that will be flipping the bill. I want them to do their job, and not make me responsible for bank execs stupid decision.

[jc3900]

About a month ago or so when I was looking for a bank to take a cd with, I remember looking at indymac. After seeing that it was located in CA, offering a high cd rate, and that bank failures were forecasted to surge I chose a different bank. I guess it is an example, although a rare one, of a value trap that happens in stocks.

Oh and just as a note, PLEASE DON'T TAKE A GMAC CD. My grandma got a call from them the other day and they were offering her a 6% annual cd. Sorry but in these times, that high of a rate only signals trouble and bankruptcy.

[safari]

About a month ago or so when I was looking for a bank to take a cd with, I remember looking at indymac. After seeing that it was located in CA, offering a high cd rate, and that bank failures were forecasted to surge I chose a different bank. I guess it is an example, although a rare one, of a value trap that happens in stocks.

Oh and just as a note, PLEASE DON'T TAKE A GMAC CD. My grandma got a call from them the other day and they were offering her a 6% annual cd. Sorry but in these times, that high of a rate only signals trouble and bankruptcy.

As long as you don't have more than $100K at a bank, there is no risk to your money. I know someone who had a CD at IndyMac, and the FDIC agent told her that she can take that money out on Monday without paying early withdrawal penalty. She can also leave the money in the account until the maturity date, but the interest rate will be renegotiated with her. I'd love to get a 6% CD right now, even if I knew that the bank would be going down in a few months.

[scfr]

I still have money in CD (due in September).

MoneyenoM: Hope everything went smoothly for you.

f you're still around, would love to hear how things went:
- Did the terms (such as interest rate) of your CD stay the same? Were any changes made?
- When the CD matured, how long did it take for you to get your money? And how did you get it? Was a check mailed to you?

[Aleta]

Speaking of CD's, I took out one this year at my brick and mortar bank for 6 months. I found out 1 month later after checking the account online that no interest had been added. I called the bank and found out that although it would be compounded that it wouldn't be paid until maturity. Really didn't like that because until a bank posts its interest rather than monthly, quarterly, or every six months, it probably wouldn't be liable to pay the interest on your CD in case the bank had a failure.

Make sure you find out first when your interest will be posted to your account. Thank goodness this CD is maturing in 27 days. It wasn't one of the higher paying CD's. I was concerned about the rates going down even further when I got it.