Saturday, July 12, 2008
In what regulators have described as the second-largest bank failure in the history of the United States, IndyMac Bank has been closed by the Office of Thrift Supervision and placed under the conservatorship of the Federal Deposit Insurance Corporation (FDIC) due to plummeting shares and the start of a run on the bank. This is the fifth FDIC-insured failure of the year.
The FDIC has said that it will transfer all insured deposits and substantial assets, to the new IndyMac Federal Bank which, as the name implies, is controlled by an agency of the federal government. The aim is for the transfer to be completed by Monday.
In a press release, the FDIC attempted to reassure customers by saying that, “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.” As an FDIC-insured bank, all FDIC accounts are guaranteed up to US$100,000. The FDIC has also placed a special advance, guaranteeing any funds over $100,000 for 50 cents to the dollar.
This move by the FDIC is expected to cost the organization at least four billion USD per year.
In the days leading up to the conservatorship, market analysts have predicted the failure of IndyMac due to the fact that it was shedding jobs and closing many of its branch offices.