Run on IndyMac turns tense in Encino

From LATimes.com this morning: "Los Angeles police were dispatched to an IndyMac branch in Encino this morning when customers waiting to withdraw money became agitated after several people tried to cut in line on the second day of the failed institution's federal takeover. Police told customers to remain calm or face arrest as they tried to withdraw their money."

The story says people lined up at the Encino branch of IndyMac Federal at 1:30 a.m. today.

Bloviation: These are unusual times -- police called to maintain order at a failed bank in a relatively wealthy section of Los Angeles?  Think of the events of the last 10 days or so -- the death of IndyMac as a mortgage lender, its failure as a bank, the run on the bank yesterday and today, the crisis of confidence in Fannie and Freddie, the Fed's new rules banning certain mortgage products. These are not consistent with bringing confidence, and buyers, into the housing market. These are consistent with caution and financial fear.

Your thoughts? Comments? E-mail story tips to peter.viles@latimes.com.
Photo credit: L.A. Times

Comments

[yours truly, Johnny Dollar]

The Grapes of Wrath (in reverse).
It's today's potato famine;
It's time to leave the Socialist Republic of California
and to immigrate to America.
It may be called fly-over country;
but, its people are down to earth.

[Rob]

Tell these folks to calm down, this isn’t far askew then the Northern-Rock headlines of emotions run amuck. Fear of misinformation.

I only know what I've been told. Shoulda put it all in Gold..

[Cal]

You must haven't spent much time in Encino Peter, the sense of entitlement there is incredible. Police are called out to Starbucks if someones believes the employees haven't shown them the proper deference.

p.s. I think the big story on Indymac that directly affects the housing market is Sheila Bairs announcment that they will stop foreclosures on any portfolio loans ($15 billion) and wants to do the same on any serviced loans in their $200 billion servicing portfolio.

[RichW]

.. and not far down Ventura in Encino are Downey S&L, First Federal Bank, and Imperial Capital Bank (their current stock prices speak volumes). Perhaps Encino hasn't seen the last of this...

I wonder about the bigger players (WaMu, Wachovia) and BofA with that dead brick called CountryWide tied around its neck.

[mike]

i have $1500 in downey savings. the rest is tied up in real estate.

they should have pulled their money out of imb when they started making weird loans!!!

[Calculated Risk]

Peter, it seems weird there is a bank run this week. The money is either FDIC insured (and those people don't need to worry), or it's over the limit - and those people may want to understand the situation.

I doubt most of those people in line had more than the FDIC insured limit at IndyMac. Their money is safe - no need to stand in a line.

And if they had more than the FDIC insured limit, there is nothing standing in line will do. They should have been there last week.

Best Wishes.

[Michael Snyder]

This scene in Encino is particularly appropriate as these fools are running on a bank felled by the jawbone of an ass. Biblical Blarney aside; I'm with Rich W looking down the street. This is just the tip of the iceberg.
Nobody outside the "financial sector" likes Paulson's plans for Fannie & Freddie and even though the Street is bouncing back from a 200+ point drop this morning, that cat is getting pretty mushy since the DJIA is down over 20% on the year.
WAMU & Downey (both bastions of exemplary customer service) are rapidly heading towards penny stock status as WAMU's has lost over 90% of its' peak value. If some "expert" decides to question its' stability, the Fed won't be able to print enough cash fast enough to cover that stampede.
It doesn't take a rocket scientist to read the handwriting on the wall. With inflation rocketing into territories even the Fed can't continue to ignore and a tapped out consumer base we stand a good chance of being in a full blown depression before the "experts" even acknowledge we're in a recession. All the election year "stimulus" & Congressional maneuvering won't save Wall St from its' own bad ideas any better than all the King's men could put Humpty Dumpty back together again.

[puckhead]

I agree w/Cal. No foreclosure on loans? So people can stop paying their mortgage w/o fear of foreclosure?

[TakeFive]

".. and not far down Ventura in Encino are Downey S&L,..."

Downey was mentioned on the 9 o'clock news last night (when the seniors are still up). They showed a graph of the stock price for the last 12 months.

Want to place odds on a run on Downey this week?

[Tombstone Realty]

You should see how they act in Starbucks.

[FairEconomist]

A run on IndyMac *now* is just plain dumb. It's the safest bank in the country - now. If it runs out of money, it can print more, because it's effectively part of the federal government. Why am I not seeing that mentioned in the media?

[firesale]

I don't think much of the truth is getting out to
uninsured customers of IndyMac who are
waiting in these lines.

They're being given 50 cents on the dollar,
immediately, but the average FDIC return from
sale or liquidation of failed banks over the last
decade or so has amount to only 72 cents on the
dollar after years of waiting. IndyMac's position
for a sale of assets is considerable weaker
than most. If these poor folks see 60 cents on
the dollar at the end of the road, they're probably
doing well.

Actually, there should now be longer lines at
every other bank in town as people double
check their POD insurance status for
double coverage per living depositor($200,000.)
A branch manager at another bank told me,
yesterday, that there are thousands of customers
at his bank who are exposed (under insured),
right now, and are probably not aware of it.

Don't just think you're cover! Get it in writing and
make sure every account name has the POD
qualified persons listed, correctly. YOU MUST
PROTECT YOURSELF! DO IT NOW !

[hubris]

FairEconomist,

Can you elaborate on your point?

[TakeFive]

Picked up the dead tree version of the Times at lunch today.

Guess what's on the front page: picture of a run on IndyMac along with the stock charts for WaMu, Downey, and FirstFed.

It's going to be like the running of the bulls in Spain. Only now it's bears chasing senior citizens trying to get in the bank before their savings get mauled.

[bobsuruncle]

"A run on IndyMac *now* is just plain dumb. It's the safest bank in the country - now"

Why don't you go down to the branch and tell that to the people who have over $100,000 deposited in IndyMac.

[Tony Bonilla]

To Johnny Dollar - I don't know what your comment has to do with the run on IndyMac Bank. Socialist Calif? Are you out of your mind?

And as for the "down-to-earth people" you talk about...I'll bet you're talking about the ones who think Barack is a terrorist. I'll bet they are the ones who will not vote for anything but a white guy for president.

See you later, Johnny...I don't think anyone will miss you.

[Jack]

"I doubt most of those people in line had more than the FDIC insured limit at IndyMac"

NBC News and CNBC have run interviews with several people in the lines who had well over $100K in IndyMac.

Another interesting bit on NBC: the OTS usually steps in when a bank surpasses 5 percent in nonperforming loans; however, IndyMac was at nearly 11 percent and the OTS did not act.

What were they waiting for?

[sheila]

with this little grace under pressure, imagine if any of these upper middle-class white people had to deal with the enormous stress, powerlessness and risk of BEING POOR IN AMERICA. they would all go postal in about 10 minutes.

[Cal]

bobsuruncle: "Why don't you go down to the branch and tell that to the people who have over $100,000 deposited in IndyMac"

Maybe you can explain how standing in line will help those people now?

[Ace]

I can't imagine LAPD answering that call. "yeah, let me wrap up this double homicide and gang shooting and we will be right over to make sure that no one skips you granny".

[Laker]

Jack,
Are you sure Indymac had 11% non-performing loans???? NO way!
AS you said, 5% is enough to wipe out a bank.

I also don't understand the line at Indymac and the run on the bank. Currently there is NO MORE Indymac bank. There is however Indymac FEDERAL bank. All accounts that had less than $100,000 per depositor were transfered to Indymac Federal. That is it. If you had more than $100,000, you are a moron, and your NEW account will only have $100,000 in it. You may contact FDIC for a claim and you are likely to get 50% of it. The rest...nobody knows....
I have money in Indymac, slightly less than $100,000. I'm not standing in any line. As some have said here, Indymac FEDERAL is the safest bank there is, it is the government...and yet they pay best interest rates....it is stupid to pull money out of them today !

And CAL, I agree with you on the foreclosure moratorium. The idea of foreclosure is what brings us mortgages at 5-6%. If you eliminate them, rates would go to 20%
I think, FDIC is thinking that by modifying the loans and reducing principal balances, they can lose less than the $8 Billion they estimated.... Problem is most borrowers of Indy have stated income, their actual income can afford less than half of the mortgages....
What a mess.....

[Laura]

I don't get that either, why stand in line. They aren't going to give you your money. I drove by Santa Monica's IndyBank and saw people sitting in chairs waiting in some sort of line.

There was a police officer present, but he had on a funny hat, sorta of a ranger's hat. I'm assuming it was "Fed Police"....anybody know??

Can somebody please tell me what is going on inside, what are these people actually receiving once they get in the bank? It has to be paperwork, and not the green kind...

[Steve]

Just one more reason to leave the hell hole. Unbelievable, get out and switch to a regional bank outside of CA

[RichW]

Surely the people over insured limits considered the extra as "risk capital" otherwise they would have distributed their money across more than one insured bank/CU. Just a guess, but I'm willing to bet people saw the high interest rates that IndyMac was offering and they got greedy. I suppose its the same economic vs. risk argument as driving without auto insurance.

[Laura]

Sheila,

What does being white have to do with it...what a stupid comment.

Nobody should have to go through this...you have
e.g. $175K and find out $75K is gone. That's not right.

By the way $175k in L.A. isn't exactly wealthy or even upper middle class...

It's sad regardless of race....there is such a thing as the human factor.