IndyMac Bank Seized By Federal Regulators
IndyMac Bancorp (IMB), the latest victim of the subprime mortgage crisis, has been shut down by the Office of Thrift Supervision (OTS) today. To avoid selling IndyMac’s assets at fire-sale prices, the FDIC will take over its operations and run the bank until it can find a buyer. The bank will be reopened on Monday as IndyMac Federal Bank, a successor institution.
The FDIC insures up to $100,000 per deposit and up to $250,000 per retirement account. The depositors with funds below the insured limit should only experience minimal service outage. However, the FDIC said that there’re some 10,000 depositors who had funds in excess of the insured limit, for a total of $1 billion in potentially uninsured funds. The bank’s creditors and customers with uninsured deposits will be notified by the FDIC to submit proof of their claims to the receiver.
Are banks too big to fail? IndyMac is indeed the second largest financial institution to close in U.S. history. At the end of the first quarter of 2008, it had assets of $32 billion, 33 retail branches, and 7,200 employees. Think about it…
As a former customer of IndyMac, I put around $22,000 from a 0% APR deal into a 6-month CD that offered an interest of 5.7% APR last Fall. Thinking back, I did anticipate a possible bankruptcy/closure but realized that my risk was limited with the FDIC insurance limit of $100,000.
