After some depositors pull funds, IndyMac responds to latest rumors about its health; says it's working with regulators

UPDATE: Comments from Sen. Schumer's office now are included below.

Pasadena-based mortgage lender IndyMac Bancorp, battling fresh rumors that it is near collapse, conceded today that its financial position "has deteriorated since last quarter," and said it was working on a plan with its regulators to improve "the safety and soundness" of the bank.

The company's statement, put up on its corporate website, follows a weekend that saw depositors line up at some of its San Gabriel Valley branches to pull their money, as they reacted to news reports questioning the company’s survival.

It’s no secret on Wall Street that IndyMac has been ailing in the wake of huge losses on its loan portfolio as borrower defaults surge. The company’s stock price has been hammered down to mere pennies, and the plunge in the shares has accelerated over the last week. They ended at a record low of 62 cents today, down 23% from Friday’s close of 81 cents.

But depositors may have been spooked by a letter late last week from Sen. Charles E. Schumer (D-N.Y.) to the Federal Deposit Insurance Corp., the Office of Thrift Supervision and the Federal Home Loan Bank of San Francisco, saying he was "concerned that IndyMac’s financial deterioration poses significant risks to both taxpayers and borrowers."

The letter stunned some Wall Street analysts, who said Schumer was in effect sealing the lender’s fate by raising the prospect of its failure. Schumer's response? Don't kill the messenger. “Make no mistake about it: IndyMac’s problems were caused by IndyMac’s management and no one else," Schumer spokesman Brian Fallon said in an email. "The home loan bank system has an obligation to lend responsibly and police its members. But it has not been doing its job. We have found the only way to get the home loan bank system to act appropriately and positively is to make public the concerns we’ve already expressed privately."

In its statement today, IndyMac said that after the Schumer letter appeared in the media, "we did experience elevated customer inquiries and withdrawals in our branch network last Friday and on Saturday of roughly $100 million." IndyMac said that amounted to about 0.5% of its total deposits of $19 billion.

"While branch traffic is somewhat elevated this morning, it is substantially lower than on Saturday," the bank said. It added that more than 96% of its deposits were fully insured by the FDIC (meaning the accounts were within federal insurance limits, and therefore should be safe no matter what happens to the company).

But the final part of IndyMac’s statement sounds more like a plea than a declaration that it will survive: "We are hopeful that this issue appropriately abates soon," the bank said about the deposit outflows, "so that we can focus, with our regulators’ involvement, on the important issue of continuing to keep IndyMac Bank safe and sound through this unprecedented crisis period."

Separately today, the non-profit Center for Responsible Lending published a report slamming  IndyMac's lending practices in recent years. Read it here.

Photo: Nick Ut/Associated Press

Comments

[concerned]

so when will the FDIC come in and close them down?

[Caledonia Kid]

If IndyMac were to fail/collapse, what would happen to the mortgages that many of us hold with the bank?

[concerned]

nothing probablly borrowers continue to make their payments until their loans have been sold

[Mark]

It is a shame that Senator Schumer came out with his concern so publically.

[anon]

It does seem fitting that all the folks at IndyMac should be worried about their jobs LIKE EVERYBODY ELSE HAS BEEN AROUND HERE LATELY. It's going to cost taxpayers billions to clean up the mess they've made with their garbage loans.

Hopefully SoCal real estate will go down another 50% soon and approach reality once again.

P.S Why is Mike Perry still running IndyMac? It's a mystery to me! IndyMac stock has sunk from 47 to 0.6 (down 99%) in the last eighteen months. They will be bankrupt this week at the present rate. IMB investors must be livid...

[Armyvet]

No matter how well intentioned, I believe Senator Schumer's remarks were ILLEGAL because--to the best of my knowledge--there is a federal law that forbids speech that questions the financial stability of a federally insured bank. The purpose of this law is to help prevent "runs on a bank, which causes substantial withdrawls by depositors.

[Bill Watson]

Surprise, surprise? Not...

After witnessing the bank's practices through these years, its unbelievable that this company has remained quiet in the eyes of the media. Not to mention Nepotism which is probably another factor to its failure.

They must be discussing their last hurrah on a family dining table.

Don't you think its time to finally witness divine retribution?

Face it. There is no other option.

[anonymouse]

I wonder how many IndyMac employee owned homes will be for sale this time next month? Are 3,000 local employees really losing their jobs or is this just a rumor? I read the Star News article and it looks really bad.

[wondering]

if you have a couple million due in the coming in the coming months in maturing cds would you withdraw early and take the penalties or ride it through

[Laker]

wondering,
if you have a CD for more than $100,000, or $200,000 in case it is joint account, i would run tomorrow morning, and take all funds ASAP. pay fees if you need to just save your money. FDIC does NOT have a lot of cash to pay more than the limits, sometimes they do, but in a case like indymac, they will not, it is just to much to pay. You can leave $100,000 in there so that you still gain top of the market interest, and FDIC will pay you back that sum guaranteed by the federal government.

[jr420]

Wondering - GET YOUR MONEY OUT NOW!!! Are you seriously going to wager a couple mil for 150 bps? (If so, can I interest you in some property in the high desert?) Seriously, you would be crazy (or a billionaire) not to be at the IMB first thing tomorrow morning...

[xs]

"It is a shame that Senator Schumer came out with his concern so publically."

Yes it is, isn't it. Our Government representatives really should just go back to sitting on their hands and letting the banks buy and sell what's left of America. Face it, America's not a country, it's a corporation - and it's about to go out of business...

[anon]

I would not be so sure that IndyMac will continue paying interest on CDs or bank accounts if it fails or goes into bankruptcy re-organization.

Principal will probably be returned -- eventually -- courtesy the FDIC. But with interest? I would check on that. Also, don't count on getting more than your FDIC limit. Also, I have been told by an informed source that the fine print on CDs means that they do not have to repaid immediately when you ask, even if you are willing to pay fees. Me, I undid my CDs at a large regional bank, not IndyMac, early this year, and I just persuaded my mother to get out of hers at Wachovia. Don't mess with your money for a few dollars of interest--that's silly. Keep cash where you can get at it and put some into foreign currency and precious metals on the next dollar dip. Or read Joe Stein or Ben Stein and buy stocks....NOT!

Lastly, all these bailouts and depositor refunds are at taxpayer expense. Remember that, while you are angling to get higher interest rates at failing banks.

[Ann]

Schumer should know better, I'd like to see him prosecuted or at least kicked off the senate banking committee.

[terryr]

Reading these comments it's true people are angry. While i agree Indymacs management bears some responsibility for the banks current trouble. These issues are much bigger than the bank. Indy mac sold a product like a store. Wall street wrapped it in a pretty box, the credit rating agencys put on the bow, and the government regulators including Johnny come lately's like Sen Schumer in effect put it on their fictitious bridal registry by failing to recognize (or admit) that the securities (derivatives in essence big fat IOU's) had been sold and inflated so much that they no longer were backed by anything... that is the effect of a global market there is more to come and every government central bank knows it, and no matter how much fresh cash they print and throw at the monster it wont be enough... with that said, banks will fail, big and small, in the usa and just as much of a concern to You and I those all over the world. lots more to come.... if you have, money diversify it and dont feel all that great about an FDIC guarantee either after all isnt that just another promise to pay?? OH and it is still not responsible for A Senator on the banking commitee to release comments that could cause a bank run even if they a rooted in fact... people can get hurt

[SeriouslyInTrouble]

Question is, if IndyMac hands you a Cashiers Check, which you take to another bank and immediately deposit, but IndyMac goes belly up before the check comes back to them, are they obligated to pay? That is, has the money been put aside at the moment the Cashiers Check is issued, so that the withdrawn funds used to write the check are safe???

Could one conceivably make things worse for herself by taking a Cashiers Check from IndyMac, instead of just leaving less than $100K in the account and letting the FDIC deal with it?

[concerned in Irvine]

The real question is "how long does it take the FDIC to get you your money back?". That's what I want to know. I'm getting great interest on my CDs so I don't want to pull the money if I don't have to but if it takes months to get my money, it isn't worth the risk.

Anybody know?.....

[Tom Petruno/Money & Co.]

concerned in Irvine: The latest blog post on IndyMac should address your questions RE the FDIC.

Tom Petruno

[Brian]

Concerned, here is some info regarding the FDIC insurance.

Q. If a bank fails, what is the timeframe for payout of the funds that are insured if the bank cannot be acquired by another financial institution?

A. Federal law requires the FDIC to make payments of insured deposits "as soon as possible" upon the failure of an insured institution. While every bank failure is unique, there are standard policies and procedures that the FDIC follows in making deposit insurance payments. It is the FDIC's goal to make deposit insurance payments within one business day of the failure of the insured institution. Typically, a bank that has failed will be closed on a Friday. The FDIC will then work the weekend to complete deposit insurance determinations for most deposits and be prepared on Monday to either transfer the insured portion of a deposit to another FDIC insured institution or provide deposit insurance payment checks. (Note: Some deposits that require supplemental documentation from the depositors, such as accounts linked to a living trust agreement or funds placed by a deposit broker, may take a little longer. The timing of the completion of the deposit insurance determination is based solely on the depositor providing the documentation needed by the FDIC to determine insurance coverage.)

http://www.fdic.gov/deposit/deposits/deposit/faqs/index.html

I am questioning what to do myself....grrr....

[Helene]

Our property taxes are in escrow (collected with our mortgage payment). If Indymac goes bankrupt, what happens to our escrow $? Will our txes get paid?

[Bob]

I have an CD in an IRA with IMB of which only half of the amount is covered by FDIC. Am in a quandary because the CD will mature in a little less than three months.. Do I take a chance and hope that the institution will remain solvent for three months or bite the bullet and take an early withdrawal of that part not covered by insurance.. The penalty amounts to $7,000.

It seems to me that when depositing money with an institution you are entering into an implied contract whereby they pay you interest for their use of your money and at the same time insure that your money will be safe by using sound business practices. You the lender is penalized if you withdraw your money early. Presumably the penalty prevents the lender from withdrawing his money and gives the banking institution some assurance that the money will remain until maturity. Now if the bank fails to uphold its part of the contract, i.e., poor banking practices, wouldn't that also negate the bank being able to charge an early withdrawal penalty?

The above is probably just wishful thinking..

Bob Hager

[Curious in West Hollywood]

If an acquaintance of mine owes IndyMac a substantial amount of money, a debt that is secured by a TD against his home of questionable value in this RE market, would IndyMac be interested in selling me the debt and TD at a discount to improve its liquidity? If so, with whom would I commumicate to explore a possible deal? I might be willing to buy several such secured obligations.

[joan rogers]

what happens to the funds in my CD?

[Jamie]

Greetings,
it went bell up today. I didnt even get a chance to withdraw anything, I am not sure about the fate of the money exceeding 100K. Looks like I have to talk to an FDIC agent and send documents, and if I am lucky, if they have enough funds I might be able to get some portion of it. Anyone else in the same situation?

[William]

Here's a link to Q&A regarding FDIC taking over IDM.

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