Where to start? On Friday, the 6th largest bank, IndyMac, was closed and taken over by the Fed. Interesting, sad, even. The new bank will be called Indy Mac Federal Bank and the Federal Deposit Insurance Corporation (FDIC) was named conservator. IndyMac had total assets of $32.01 Billion and $19.06 Billion worth of deposits since the end of March. While mainly in Southern California, IndyMac was heavily invested in the nationwide mortgage market place.
According to the FDIC Press Release “Insured depositors and borrowers will automatically become customers of IndyMac Federal, FSB and will continue to have uninterrupted customer service and access to their funds by ATM, debit cards and writing checks in the same manner as before. ”
All 33 branches will reopen on Monday.
Looking back over the previous 11 days provides interesting insight into what ended, or just began, with the closing of IndyMac.
A letter, made public 11 days prior to the closing, had been sent by Senator Charles Schumer, D-NY, to the FDIC, Office of Thrift Supervision and The Federal Home Loan Bank questioning the liquidity of IndyMac. When this letter was made pubic it started a chain of events. Over the next 11 days depositors withdrew 1.3 Billion dollars from their accounts.
A statement from the Office of Thrift Supervision in part states
“This institution failed today due to a liquidity crisis,” OTS Director John Reich said. “Although this institution was already in distress, I am troubled by any interference in the regulatory process.”
IndyMac is the largest OTS-regulated thrift ever to fail and, according to FDIC data, the second largest financial institution to close in
To some degree it almost appears like self-fulfilling prophecy.
Many of questions remain – are Fannie Mae and Freddie Mac headed for federal intervention as well? According to a New York Times article it seems likely, but then turn to Fortune Magazine and this statement “Fannie and Freddie have their financing needs covered through the end of next year, and that “concerns of an immediate collapse seem overwrought” grabs your attention.
Today, Sunday, NPR announced “Treasury Secretary Henry Paulson announced a sweeping financial package Sunday designed to shore up the country’s ailing mortgage giants, Fannie Mae and Freddie Mac. The measures would allow the government to lend money to the two companies — and to buy their stock, if necessary. ”
Seemingly important is this announcement came on Sunday, prior to the opening of the stock market on Monday morning.
More to come…