IndyMac shut down
The bailout news is growing out of what anyone could have expected. IndyMac was no small bank, its assets number $32 Billion. This isn’t a regional savings and loans blowup, IndyMac was very large and established as a major mortgage banking institution in the United States. Most of the depositors were under the $100,000 FDIC insurance threshold and will be able to make payments, draw checks and withdraw money via the ATM until this mess is sorted.
Then there are the other 10,000 members who had assets over $100,000 and are less likely to get a full refund on the total amount deposited. FDIC regulators say that they’ll give a payout of 50% of the uninsured amount until the assets of IndyMac can be sold and deposits recovered. The problems at IndyMac went full circle when a letter from a New York congressman was released noting the importance of keeping IndyMac from collapse.
This kind of bank failure is what we saw prior to the days of the FDIC and other Fed regulatory committees. Depression era thinking is alive and well, people went to the bank to make major withdrawals. The bank had been planning to work several billion dollar loan origination deals with the Federal government but the rapid drawing on its reserves led the bank to close its doors rather than work new deals.
The warning signs were obvious. The company had stopped new loan applications and planned on cutting its workforce by more than half after a 3,800 employee cut. The vitality of the banking industry looks bad night now, very bad. If you’re holding shares of anything banking, dump it.
Those with multiple accounts under $100,000 are probably screwed. During the S & L mess I had a friend with three accounts each under $100,000 that totaled $230,000. She was reimbursed a total of $100,000. Those at the S & L assured her all the money was insured. There was another S & L across the street. She lobbied Congress to no avail.