Breaking: Federal regulators take control of IndyMac

Breaking news from L.A. Times: "Federal regulators say they have taken control of Pasadena-based IndyMac and will transfer control to the FDIC."

More: "The federal government said it took control of troubled 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 Pasadena-based IndyMac, said it transferred control of the $32-billion bank to the Federal Deposit Insurance Corp."

Battered by bad loans, and a declining balance sheet, IndyMac is viewed as all but worthless by investors, who drove its stock down to just $.28/share today prior to word of the federal takeover. The shares had peaked at $50.11 in 2006.

The federal takeover of the bank comes just four days after IndyMac announced that, at the request of federal regulators, it was exiting the mortgage business and laying off more than half of its staff.

As recently as last week, the struggling thrift had denied that it was close to failure, saying it was working with regulators to improve its "safety and soundness."

But the Mortgage Lender Implode-O-Meter website reported earlier today, "The FDIC is in charge." of IndyMac.  Full post:  "The FDIC is in charge" was the verbal announcement ringing through the halls of IndyMac's Pasadena offices.  "Everyone show up for work on Monday."

Will file more on this later. More on IndyMac here.

Your thoughts? Comments? E-mail story tips to peter.viles@latimes.com
Photo Credit: Bloomberg News

Comments

[Uncle Billy Went to Washington]

Yup, they show up on the fdic website under "quoth the raven, nevermore"

[jjohannson]

FDIC Failed Bank List here, for your perusal. Expect more soon.

http://www.fdic.gov/bank/individual/failed/banklist.html

[Cal]

Timely article from American Banker as to what it all means for the FDIC:

http://americanbanker.com/article.html?id=
20080709TREHT6H9

I thought the issue about the priority of the FHLB over the FDIC in regards to which assets they get was interesting. Definitely a doozy of a blowup.

[Alan Browne]

I just hope that this will be remembered and that when mortgage lending rules tighten back up that people will see that there is a reason for due-diligence and sensible loan criteria.

Ban:

- teaser rates
- interest only payments for any period
- hidden fees
- loans without a down payment

Enforce:

- Due dilligence

Add new requirements:

- 50% of a mortgage has to be funded by sources within a 200 mile radius of the home.

The above will return the markets to normalcy for the long term.

[Bill]

Good Ridance, now it is time for Freddie Mac and co. to go.

[windu]

Scared yet?

This is only the beginning, folks. Hope you have a king-sized mattress to stuff your money under.

[TakeFive]

Next week: Downey Savings and Loan

52Wk High: 65.67
52Wk Low: 1.66
Jul 11 - Close: 1.69

http://finance.google.com/finance?q=dsl&meta=hl%3Den

[Caledonia Kid]

SO, what does the Fed takeover mean for those of us with loans (albeit nonshaky ones) from IndyMac?

[Mark]

Take the blinders off people we have been in a major recession since Dec 2007 and with the fall of IndyMac and soon Fannie Mae and Freddie Mac this is looking more like a depression. My bet is that at least 5 more banks and mortgage companies will fail. Looks like the stimulus checks really saved the economy.

[Uncle Billy Went to Washington]

Caledonian, see following link:

http://www.fdic.gov/bank/individual/failed/IndyMac.html

[desmo]

I believe banks should have a rating system just like restaurants posted on the front door, A through F credit ratings, etc. Let people know how safe their money is at all times.

[Tombstone Realty]

This seems more than just some piddly recession - I mean, this is as if the whole market was built on quicksand, and now the whole damn thing is going down.

No point in sticking your cash in a mattress, when the mattress ends up being worth more.

Monday. Oh man Monday will be vicious on Wall Street - either because of people afraid of their bank, or because day traders are going to do their damnedest to push the weak over that financial cliff.

[yours truly, Johnny Dollar]

You were saying?......
I know in my advertising efforts with them, they
were beyond the valley of arrogance.
aka: what goes around comes around.

[Cal]

Windu: "Scared yet?"

Scared of what? I think everything is progressing along logically and I think America can handle the blow, especially if we recognize the problem. But Indymac going under, and the others to come, are manageable events. People need to be smart and be diversified as well as leave well within their means. Then the vagaries of economic whims wont ever be scary to them.

Now if I was highly in debt and was at the limit of my means I'd be scared. But they should have been scared a long time ago.

Caledonia Kid:
"If you had a loan with IndyMac Bank, F.S.B., you should continue to make your payments as usual. The terms of your loan will not change under the terms of the loan contract because they are contractually agreed to your promissory note with the failed institution. Checks should be made payable as usual and sent to the same address until further notice. "

http://www.fdic.gov/bank/individual/failed/IndyMac.html

[I live in LA, too]

I'm curious why we are saying IndyMac was "battered" by bad loans. According to my friend who worked there for eight years, most of the loans were actually "good loans," but when the market to buy these loans dried up, IndyMac was stuck with loans on its balance sheet that its business model was not prepared to deal with. Inside the company, the feeling is not that IndyMac was doing "bad" business, but that the environment changed so quickly it was ill-prepared for the transition. IndyMac never wrote sub-prime loans and exited the Alt-A market two years ago.

[Liz]

I just hope you all learned your lessons, those of you who voted for Bush and those of you who just keep blogging to keep Bush in power. This is your work.

[MyLessThanPrimeBeef]

The days of wine and roses are over. I told my cat no more fancy cat food for him. From now on it's rat food only. I don't know if he will ever get used to it though.

[I live in LA, too]

Also, why should banks have ratings? They are FDIC-insured, after all.

[I live in LA, too]

The banking regulator said it closed IndyMac after customers began a run on the lender following the June 26 release of a letter by Sen. Charles Schumer, D-N.Y., urging several bank regulatory agencies that they take steps to prevent IndyMac's collapse.

In the 11 days that followed the letter's release, depositors took out more than $1.3 billion, regulators said.

[Cal]

Banks have a rating system, it is binary though. They are either well capitalized or not and the switch is turned overnight by the FDIC.

[Roger Ramjet]

Thgis is great................fee's, fee's, fee's............The moron that ran this Bank is gonn'na walk with millions! That's called a screw up general public......

[Curious]

I could have doubled my money today with FRE but I was sleeping in --hmm?

I love California and the USA!!!!

I wish T. Boone Pickens was on the ballot :)

[Octavio Nuiry]

This week, IndyMac collapses.

Next Week, Fannie Mae and Freddie Mac will fall.

Then, Lehman will become insolvent.

Who’s next?

[Lynn]

Mr. Mozillo must be so proud of what he has accomplished along with the other disaters his greed created. Fate may have not written the final chapter. May he never live long enough to enjoy what he stole.

[El Perro]

Hey, I live in LA too:

the FDIC itself uses rankings of bank capitalization, which are made only partially available to the public. I talked with a FDIC analyst myself a couple weeks ago, the reasoning for not full disclosure being that if the people knew that a particular bank is undercapitalized to the brink of being labeled "unsafe and unsound", then depositors (if awaken) would create a Schumer run (run on the bank), reinforcing the negative feedback loop and possibly bringing down the institution.

Hey, you also may want to know that FDIC funds are not infinite, in fact they are (before the IMB collapse) just $ 53 Billion (check the FDIC site and look for the DIF report) and possibly after IMB there will only remain $ 45 Billion to cover the remaining insolvent banks....it will only take 7-8 more Indymacs, or 14-17 half Indymacs to totally extinguish the FDIC fund, an event that seems very likely every passing day...which bank you have your hard earned money deposited in amigo? do you trust blindly that your money is safe???? ah and remember, any amount in excess of $ 100k at a bank is deemed at least a 50%, if not total, loss... adios...greetings from NorCal!