US regulators may not be ready to protect bank By Kevin Smith, Staff Writer Article Launched: 06/27/2008 11:16:51 PM PDT
IndyMac Bancorp Inc. appeared to edge closer to a meltdown Friday as its stock fell to 75 cents a share amid concerns that a collapse could leave the Pasadena-based bank's borrowers and depositors in the lurch.
Sen. Charles Schumer, D-N.Y., says federal regulators may not be ready to protect them and that a wave of IndyMac depositors withdrawing their funds could leave the bank "in a disastrous financial situation."
IndyMac ranks among the 30 largest companies in terms of total annual revenue in the San Gabriel Valley, according to research conducted by this newspaper. In 2007, it employed 10,000 workers and had revenue of $2.8 billion.
A financial collapse could leave scores of employees without jobs. At one point IndyMac employed about 3,000 workers in Pasadena, but that number has shifted several times as the bank has sought to "right-size" its operations.
IndyMac officials could not be reached for comment late Friday.
Schumer, who sits on the Senate Banking Committee, on Thursday sent letters to the Federal Deposit Insurance Corp., the Office of Thrift Supervision, the Federal Housing Finance Board and the Federal Home Loan Bank of San Francisco.
The Associated Press reported Schumer was concerned IndyMac "may have serious problems with its current loan holdings, and could face a failure if prescriptive measures are not taken quickly."
Schumer asked, for example, whether the FDIC has considered ordering IndyMac to reduce its reliance on brokered deposits, sold by securities firms to customers outside of a bank's local area, which can carry higher interest rates but also can be riskier than traditional deposit accounts because they may not fall within the federal insurance limit.
During its boom time, IndyMac functioned as a major alt-A lender, making loans to people who are just below the level of prime borrowers but with credit better than those who could only land subprime loans.
But caught in the crossfire of a protracted downturn in the nation's housing and mortgage markets, the bank has weathered a sobering financial decline over the past year.
As of Friday, the bank's stock had lost 97 percent of its value over the past year, falling from a high of $31.50 a share to 75 cents in after-hours trading.
Gutted by losses from write-downs on mortgage-backed securities, the company warned last month that it wouldn't return to profitability this year unless the slide in U.S. housing prices slowed.
IndyMac posted a loss of $184.2 million, or $2.27 a share, for the first quarter, compared with a profit of $52.4 million, or 70 cents a share, a year earlier.
Jason Arnold, an equity analyst with RBC Capital Markets, said IndyMac may not be able to climb out of its economic tailspin.
"If the economy erodes further from here it will probably get worse for them," he said recently. "I wouldn't rule out receivership. My gut feeling is that they won't pull themselves out of this unless something changes dramatically over the near term."
IndyMac's troubles went from bad to worse two weeks ago when a class-action lawsuit was filed on behalf of purchasers of IndyMac common stock between Aug. 16, 2007 and May 12, 2008.
The action, filed by Coughlin Stoia Geller Rudman & Robbins LLC, targets the bank, CEO Michael W. Perry and A. Scott Keys, the bank's chief financial officer.
The lawsuit alleges the defendants issued "materially false and misleading statements regarding the company's business and financial results."
The bank's exposure to non-performing assets - particularly loans in its pay-option, adjustable-rate mortgage and homebuilder construction portfolios - was likewise downplayed and concealed, according to the complaint.
Two other class-action lawsuits have since been filed.
The Associated Press contributed to this story. Edit by Moderator: Thank you for your participation. Please note that there is also discussion about this topic Here.
Here is a good FDIC website link for those with UNINSURED FUNDS. FDIC Dividends from Failed Banks Go to the bottom of the page and select a bank. For example, select the Bank of Honolulu and it will show an advance of 65%, plus a few traditional payback and one final payment totaling 100%, after almost 5 goddamn years. Now select Netbank and it will show an initial payback of 50%, 21.3%, and 6.322%, for an aggregate total of 77.655% as of Apr 2, 08. I suspect some sort of final payment is still in the works for Netbank customers.
In as far as me and other fellow Indy customers, Indy uninsured portion, we'll get the 50% upfront, then wait and wait for additional payments trickling in. All depending on it's assets, blah blah blah, liquidation, etc.
Message edited by: 01LX on 2008-07-12 13:50:16 CDT
Yea I got a $100k sitting in the 4%, But at risk $1k sitting in the check writing money market. Have that account as an easy way to get money out but if I go under $1k get hit with a fee. Willing to take the gamble on it
jayK said:There are rumors that Wells Fargo could potentially buy out IndyMac.
Why would Wells Want Indymac? Wells has a huge footprint in Los Angeles already and IndyMac is an LA based sub-prime lender. All the rumors I have read about or heard on CNBC if you even consider those creditable rumors state Wells Fargo has been eyeing investment banks as Wells has no investment bank division what so ever and Wells could leverage there AAA rating. Wells Fargo like BOA is a straight commercial bank and has no broker/investment bank division as both of them sub contract out there brokerage clearing business to 3rd party investment banks.
The rumors are because many of the investment are getting cheap enough it be very possible that Wells or BOA buy one of them as that would complement their business and allow them to get into the investment bank business which is a very high margin business for the brokers/banks.
Indymac bank has suffered big losses due to the subprime meltdown, so not surprised at this news. I had a C.D. at that bank several years ago, but never was enticed by the high rates that they offer now. It is located across the country from where I live and I have somewhat similar rates at banks closer to where I live, so I never opened any new accounts. But if you do have an account, the FDIC should step in if it does shut down.
RadagastMOD said:Interesting.... I have a CD with them at 5.125% maturing late august... Yippie for FDIC....
excuse me about the newbieness of the question, but what happens if you have a CD and FDIC takes over: Does FDIC give just give you back the principal? ...or what amount of interest do they give you?
This is old news posted here..IMB came out with a release after that.. -------------------------------------- http://biz.yahoo.com/ap/080701/indymac_schumer.html?.v=2
IndyMac reassures customers after Schumer letter Tuesday July 1, 4:54 pm ET By Christopher S. Rugaber, AP Business Writer IndyMac seeks to reassure customers, investors after Schumer letter raises default concerns
WASHINGTON (AP) -- IndyMac Bancorp Inc. said it is working with regulators to "further improve" its safety and soundness after a senator's letter last week raised concerns that the bank could collapse.
Psyber said:RadagastMOD said:Interesting.... I have a CD with them at 5.125% maturing late august... Yippie for FDIC....
excuse me about the newbieness of the question, but what happens if you have a CD and FDIC takes over: Does FDIC give just give you back the principal? ...or what amount of interest do they give you?
FDIC insurance will cover your deposits, dollar for dollar, including principal and any accrued interest, up to the insurance limit.
Article is about a week old Sen. Charles Schumer (D-NY) is alway whining about something. IndyMac Reply Letter from July 1 Anyway, I try to keep under $100K at all banks to maintain full FDIC coverage.
how easy is it to claim your FDIC insured funds? How long does it take? How much of your time would you need to put in to claim both your interest and your funds. I do wonder whether the length of the process eliminate any competitive advantage Indy mac has.
goldsheet said:Article is about a week old Sen. Charles Schumer (D-NY) is alway whining about something. IndyMac Reply Letter from July 1 Anyway, I try to keep under $100K at all banks to maintain full FDIC coverage.
vladgur said:how easy is it to claim your FDIC insured funds? How long does it take? How much of your time would you need to put in to claim both your interest and your funds. I do wonder whether the length of the process eliminate any competitive advantage Indy mac has. You really need to do some searching here on how FDIC works. You do nothing, Most likely your money is at a new bank the next business day or in more rare cases a check is sent to you
vladgur said:how easy is it to claim your FDIC insured funds? How long does it take? How much of your time would you need to put in to claim both your interest and your funds. I do wonder whether the length of the process eliminate any competitive advantage Indy mac has.
Easy - FDIC comes in and takes control of bank and records, so no need to file a claim
Fast - During RTC S&L failure, I had three close on Friday Two reopened with new owners on Monday. Received a FRBSF check for ALL my money on Tuesday for the other.
None - No time, effort, or paperwork required on your part.
I would just grab highest rate and not even worry about losing a day or two interest under WORST case scenario.
Disclosure: I was over limit at IndyMac, so I wrote a check to get back under last week, but I would do that for/at any bank,
I would just grab highest rate and not even worry about losing a day or two interest under WORST case scenario. Right. I bet they have brought in a bunch of new money with these rates. Most understand how safe FDIC is and will grab these rates. I have done well with Indymac the last year with a couple of those 3-4 month 5.75% CDs. Never one issue with them and by having the MM with check writing getting matured money out was a piece of cake
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