IndyMac Bank seized by federal regulators
The Pasadena-based thrift's failure is second in size only to the 1984 failure of Continental Illinois Bank.
By Kathy M. Kristof and Andrea Chang, Los Angeles Times Staff Writers
4:48 PM PDT, July 11, 2008
The federal government took control of Pasadena-based IndyMac Bank today, in what regulators called the second-largest bank failure in U.S. history.
The Office of Thrift Supervision in Washington, the chief regulator of IndyMac, said it transferred control of the $32-billion bank to the Federal Deposit Insurance Corp.
Branches will be closed over the weekend, but the FDIC will reopen the bank Monday as IndyMac Federal Bank, the OTS said.
Regulators said depositors would have no access to banking services online and by telephone this weekend, but could continue to use ATMs, debit cards and checks. Online banking and phone banking services are to resume operations Monday.
Federal authorities said based on a preliminary analysis, the takeover of IndyMac would cost the FDIC between $4 billion and $8 billion.
IndyMac's failure had been widely expected in recent days, as regulators said it was not well-capitalized. Its stock has plummeted to mere pennies a share and some nervous depositors have been pulling their funds. The bank has been reeling from losses on defaulted mortgages made at the height of the housing boom.
"The OTS has determined that the current institution, IndyMac Bank, is unlikely to be able to meet continued depositors' demands in the normal course of business and is therefore in an unsafe and unsound condition," the agency said in a statement today.
IndyMac's failure is second only to the 1984 failure of Continental Illinois Bank, which had assets of $40 billion at the time.
At 3 p.m., IndyMac shut the doors to its main branch in Pasadena three hours early. Stunned customers were told to read a two-page notice that had been taped to the glass doors detailing the takeover.
One woman leaned against the locked doors, pleading with a bank teller inside. "Please, please, I want to take out a portion."
Another customer, Georgi Arnold of El Monte, had come to the bank to deposit $230 into her checking account but wasn't allowed into the bank. "I am livid," Arnold, 32, said. "I'm glad I closed my savings account already."
Arnold said she had "a few thousand dollars" in the bank -- money she uses for her children, small bills and vacations. "Best believe first thing come Monday I'll be drawing out all my money and closing my account because this is ridiculous," she said. "I'll go elsewhere."
The FDIC said it had opened a toll-free phone line for customers of the bank. The number -- 866-806-5919 -- will operate today from 3 p.m. to 9 p.m. PDT and then daily from 8 a.m. to 8 p.m. thereafter, except Sunday, when the hours will be 8 a.m. to 6 p.m.
Customers also can go to the FDIC's website
http://www.fdic.gov/bank/individual/failed/IndyMac.html for information.
IndyMac Bank is the deposit-taking subsidiary of IndyMac Bancorp.
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