NEW YORK (CNNMoney.com) — In what could turn out to be the most expensive bank failure ever, troubled mortgage lender IndyMac Bancorp Inc. was taken over by federal regulators on Friday.
The operations of the Pasadena, Calif.-based thrift – once one of the nation’s largest home lenders – were shut down at 3 p.m. PDT by the Office of Thrift Supervision and transferred to the Federal Deposit Insurance Corp.
About 95% of the $19 billion in deposits in the bank are insured, but that leaves $1 billion that was not covered by FDIC guarantees. According to the agency, 10,000 IndyMac customers could lose as much as half of that amount, or $500 million. The agency says the failure will cost the Deposit Insurance Fund between $4 billion and $8 billion, based on preliminary estimates.
I was wondering what kind of dent a hit of between $4 billion to $8 billion was liable to make to their reserves. According to the FDIC’s website: [This page last updated 5/22/06]
The FDIC receives no Congressional appropriations – it is funded by premiums that banks and thrift institutions pay for deposit insurance coverage and from earnings on investments in U.S. Treasury securities. With an insurance fund totaling more than $49 billion, the FDIC insures more than $3 trillion of deposits in U.S. banks and thrifts – deposits in virtually every bank and thrift in the country.
So the failure of this one bank could take up to 16% of their funds.
While IndyMac may be the most expensive bank failure ever, there’s no guarantee that there won’t be any bigger ones. A $49 billion dollar fund doesn’t seem like much of a cushion to protect $3 trillion of deposits from disaster.
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Thanks, Senator Chuck Schumer.
dfenstrate-
Schumer may not be my favorite senator, [OK, there's no question- he's NOT my favorite senator.] but I have to ask myself if he’s the guy that really stripped the emperor, or just the one that pointed out that the emperor is wearing no clothes.
twist -
One of the texts chosen by our substitute summer pastor today sheds some light on our present situation, and even on this amazing story in todays Sunday Times.
Memo to GWB: This may not be the greatest time to start a proxy war to distract America from it’s more fundamental problems.
John-
Agreed.
Even ignoring the moral aspect of it all, I think we have enough on our plate right now- and we still haven’t figured out how we are paying for the plate- let alone anything else!
“IndyMac customers could lose as much as half of that amount, or $500 million.”
Small business deposits? Will yet more debts default because these funds disappear?
Igor says :sad
IndyMac CEO Michael Perry and wife Nancy Perry each donated to Chris Dodd.
Now why would a San Marino, California banker and housewife donate to a Connecticut Senator? Hmmm… maybe because he chairs the committee that “oversees” their corrupt company?
I want Perry and Dodd in pinstripes.
crap — choked the html
I have to agree with dfenstrate. Sure, IMB was swimming naked, no doubt. But there’s a big difference between coming out and saying something directly versus leaking a “confidential” letter, thus putting the rumor machine into overdrive. He knew exactly what he was doing, nothing like that is a mistake.
This may get very interesting. I’ll be very surprised if no lawsuit comes out of it. Very surprised. As to whether the lawsuit will succeed, that depends on what is provable. Last I heard there was a $1B run on the bank immediately following the leak. Is that enough? It’s debatable.
This is scary. If the FDIC only has $48 billion to back $3 trillion, then they only cover 1.63%. We are in trouble.
igors word: “econ101″