Saturday, July 12, 2008

IndyMac Tanks After Schumer Speaks

The federal government took control of Pasadena-based IndyMac Bank on Friday in what regulators called the second-largest bank failure in U.S. history.

Citing a massive run on deposits, regulators shut its main branch three hours early, leaving customers stunned and upset...

The bank's 33 branches will be closed over the weekend, but the Federal Deposit Insurance Corp. will reopen the bank on Monday as IndyMac Federal Bank, said the Office of Thrift Supervision in Washington. Customers will not be able to bank by phone or Internet over the weekend, regulators said, but can continue to use ATMs, debit cards and checks. Normal branch hours, online banking and phone banking services are to resume Monday.

Federal authorities estimated that the takeover of IndyMac, which had $32 billion in assets, would cost the FDIC $4 billion to $8 billion. Regulators said deposits of up to $100,000 were safe and insured by the FDIC. The agency's insurance fund has assets of about $52 billion.
Read the story here.

The immediate cause of the demise of IndyMac was a classic run-on-the-bank like the one we saw in the movie "It's A Wonderful Life" (103 min film.) However, IndyMac was pushed over the edge by Sen. Charles E. Schumer (D-N.Y.) who wrote letters to the FDIC, OTS, an dtwo other federal agencies claiming that IndyMac could have "serious problems" in its loan holdings. He wrote, "I am concerned that IndyMac's financial deterioration poses significant risks to both taxpayers and borrowers." The bank "could face a failure if prescriptive measures are not taken quickly."

Schumer's warning induced bank depositors to yank $1.3 BILLION from their accounts between June 27 and July 3, 2008. Although he says IndyMac was already failing and was expected to fold for months, it tanked after Schumer's publicity. IndyMac stock peaked in 2006 at $50 per share. Closing price Friday was 28 cents. Thanks, Charlie.

The life of Indigo Red is full of adventure. Tune in next time for the Further Adventures of Indigo Red.


Gayle said...

I knew it! It just had to be caused by a Democrat, Indigo! They aren't good for the planet, you know? *sigh*

(At least I got your name right today. I'm doing better!)

Gayle said...

Off topic: Just dropped in again to let you know that the creator of the video "Don't Tread On Me, Obama" came back in to answer your question as to why she used a Canadian to sing "God Bless America." I think you'll find the answer interesting.