WARNING: IndyMac appears close to collapse

http://www.pasadenastarnews.com/news/ci_9723222

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.

1. Desperate IndyMac raises interest rate to 4.00% (for balances over 75K)
2. FDIC insures your money
3. Profit!

Why not keep 99K at 4%?

There are rumors that Wells Fargo could potentially buy out IndyMac.

Interesting.... I have a CD with them at 5.125% maturing late august... Yippie for FDIC....

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?

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.

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.

vladgur said: How trustworthy is this bank's reply?

About as much as a Senator looking for TV time
I would not trust or believe either of them.
Just provided IndyMac link for balance.

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,

scott1961 said: Right. I bet they have brought in a bunch of new money with these rates.

Wachovia is also raising a huge amount of money with their CD promos (4.00% for 7 months and 4.25% for 12 months)
I went to my closest Wachovia branch the other day and there were 6 people waiting to open CDs,
so I went to another branch where there were five people waiting to open CDs,
so then I went home and opened the CD online. I guess I should have thought of that sooner

dolmar said: 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.

Bank of America owns Banc of America securities.

comptalk said: Bank of America owns Banc of America securities.

Not really an investment bank. They clear there brokerage trades via Fidelity. They really do not underwrite anything. They are on a couple of syndicates just because of there size but are never leader or senior manager and that is where the money is in investment banking.

I just called to change my address on an existing CD and the rep offered me a 6 month CD at 4.25% APY.

Time to bite (as long as you are under FDIC limit) ???

Thrilla said: I have heard from people that actually went through a bank failure that it took over 2 years so I've heard both sides. Given the state of the US financial system at the moment, I'm not taking any chances of having my money tied up for two years.

That's FUD. It takes no time for your insured deposits to be repaid (as evidenced last year when NetBank was shutdown). It may take some time for un-insured amounts to be paid out (as frequently you will get a portion of money over the FDIC limit back) and that can obviously take time. But if you have only insured deposits you typically don't wait at all.

I haven't heard this from anyone.. I went through NetBank experience myself and if I wasn't reading these forums or financial press I probably wouldn't even know what happened, nor would access to my money have been affected for a second.

therivler1 said: 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."
I think someone needs to take Senator Schumer aside and tell him how bank runs get started.

1. Schumer might have a point, but the number of people affected might be small. For example, TD Ameritrade sells brokered CDs. Supposed you buy an IndyMac CD through TD Ameritrade, and then another one through, say, E*Trade. You could easily end up being above the FDIC limits, without realizing so.

This can be especially true when the said CDs are on some kind of a promotion. E.g., TD Ameritrade sends you an e-mail w/ a special CD offer if you bring in at least 20K. But in that e-mail they don't tell you the name of the bank selling the CD. Of course, eventually they tell you the name, but you can end up easily overlooking that detail until AFTER you have invested.

2. I had some NetBank accounts when they failed, but I am still trying to understand how the whole process works. As far as I can tell, FDIC tries to make sure that banks don't fail by themselves. In other words, FDIC or whoever (thrift supervisor) comes in and declares the operations of a bank unsafe, and takes over well before the bank is unable to pay. FDIC does this to make sure that depositors don't get bounced payments due to bank's insolvency, because that is likely to create more panic.

Assume a couple of banks get to a stage at which FDIC decides to take over. While FDIC is busy with these couple of banks, for some reason, a couple of more actually fail. The FDIC might not have enough processing capacity (employees, infrastructure, etc) to handle the new failures, even though they might have the capital needed to cover the shortfall between the insured portion of the deposits and bank's assets.

Are there any FW members who were around during the S&L crisis. How soon did the deposits get paid out?

jayK said: There are rumors that Wells Fargo could potentially buy out IndyMac.

Link? And I certainly hope not!!!!

dolmar said: comptalk said: Bank of America owns Banc of America securities.Not really an investment bank. They clear there brokerage trades via Fidelity. They really do not underwrite anything. They are on a couple of syndicates just because of there size but are never leader or senior manager and that is where the money is in investment banking.In the first quarter, BoA ranked #1 in global equity and related, #3 in global MBS, #1 in global equity - US, #8 in global IPO's, #1 in global convertibles, #1 in US-market equity and related, #3 in US market common stock, #4 (tied) in US market IPOs, #6 in US market follow-ons, #1 in US market convertibles, #3 in overall US-market debt and equity, #3 in US market MBS, and #1 in US non-convertible preferreds, among other things; they were also #9 as financial advisor on completed deals with US targets. That is a major investment bank. How they clear retail trades is really not terribly important.

mnsweeps said: Thrilla said: I have heard from people that actually went through a bank failure that it took over 2 years so I've heard both sides. Given the state of the US financial system at the moment, I'm not taking any chances of having my money tied up for two years.

you get your money within 48 hrs..

A FDIC spokesman says that depositors have lost access for up to 6 days.

I do remember the person I was speaking with did indicate the funds that took two years to be returned were above the FDIC limit.

pj737 said: sechs said: pj737 said: it was my fault for not checking my account online to insure that the deposits were taking place
I can see why you'd blame the FDIC....

I'm not blaming the FDIC for the deposits that took place which put me over the insured limits, I am blaming Indymac. If Indymac just did what they were SUPPOSED to do and what they TOLD ME they would do....

This reminds me of a quote from the post cold war about nuclear disarmament

"Trust but verify"