FDIC sheds light on closing of IndyMac Bank |
| By Laura Bruce • Bankrate.com |
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More than 30 banks have failed since 2000, but few
caused the debacle that was broadcast across the nation and around
the world following the July 11 collapse of IndyMac Bank in Pasadena,
Calif.
What should have been an orderly process looked chaotic and
at times smacked of panic. No doubt the current environment played
a large role. The housing crisis and the credit crunch have taken
a toll on people financially and emotionally.
Often, the insured deposits of a failed bank, and sometimes the loans, are immediately taken over by an acquiring
bank. It makes for a fairly smooth transition. That wasn't the case with IndyMac; no one was clamoring for the bank's assets. The
FDIC took on the role of conservator and has temporarily reopened the institution as IndyMac Federal Bank.
We spoke with FDIC spokesman David Barr, who spent days on site in Pasadena talking with worried, and sometimes
upset, customers.
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Bankrate: Why were so many customers lined up outside the bank? Did they not trust
the system?
Barr: I could never figure that out. I talked to a lot of customers and many of them
were within the insured limit. We would tell them that IndyMac has the FDIC standing behind it, that their money was fully protected
by the FDIC, and they still came and pulled out funds. It wasn't just uninsured depositors; it was people who were well within the
limit. One couple flew in to stand in line to get their money and flew home. I couldn't imagine what an airline ticket with two days'
notice to Los Angeles cost.
Other people cut their vacation plans short to come back. I never got a good reason. A lot of these people I spoke to
said they knew their money was safe; they knew the FDIC was standing behind it; yet they still came down, stood in the hot sun all day
and withdrew their money.
In the 75 years we've been insuring bank deposits, not a single customer has lost a penny of insured money at an
FDIC-insured institution. From my standpoint, it was sad to see people thinking they had to stand in line and go through all that
anxiety when their money was fully protected.
Insured deposits
Bankrate: IndyMac had about $1 billion
in uninsured deposits. So far, people have received their insured
deposits plus one-half, or 50 cents on the dollar, for their uninsured
deposits. Can they expect to receive the remaining 50 percent and,
if so, what's the time frame?
Barr: The 50 cents was based on a very conservative estimate of what we feel we can get for
the assets. But it's way too early to determine how much more, if any, they'll get above the 50 cents.
We're looking at about 90 days to sell the bank to another bank or banks, depending on how the bids come in, so we're
looking at mid- to late October. We've hired Lehman Brothers to help sell the bank, and they've just begun the process of evaluating the
assets.
There's a considerable amount of foreclosed real estate
that we're trying to sell in today's market. This was a very large,
complex institution, so I'm sure it's going to take several years
to not only sell all the assets but to completely wind down the
affairs. As with any bank failure, particularly one of this size,
there will probably be several lawsuits that (the bank) was currently
involved in or ones that will come post-closing, and that always
takes time to resolve. It can take three to five years to
resolve a smaller bank failure, let alone a $32 billion bank failure.
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