Decision due in Congress on repaying under-insured IndyMac depositors
A Congressional conference committee is about to decide whether 8,700 under-insured depositors of IndyMac Bank will recover some of their losses.
That would be a major boon for the former customers of the Pasadena bank, many of whom have complained that IndyMac employees misled them about deposit insurance limits and how to set up multiple accounts and trust accounts to increase insurance coverage.
Craig and Terry Phinney of Cerritos, who recently retired, said they lost $23,948 because an IndyMac employee erroneously assured them that their deposits were completely insured.
"It's nothing to the U.S. government," Craig Phinney said, "but it will help keep my wife and I slightly above poverty level for a couple more years."
House Democrats, including Financial Services Committee Chairman Barney Frank (D-Mass.), are proposing to include a measure to help the depositors in the financial-regulation-overhaul bill that is being finalized on Capitol Hill.
If Senate conferees agree during a meeting Tuesday, the measure will be part of the package that Congress has pledged to deliver to President Obama for his signature by July 4.
After IndyMac failed in July 2008, the Federal Deposit Insurance Corp. paid depositors 50 cents on the dollar for any of their funds determined to be above the insurance limit of $100,000 per depositor. That meant they lost half of any deposits determined to be uninsured.
Congress raised the deposit insurance limit to $250,000 shortly thereafter. The proposal, sponsored by Reps. David Dreier (R-San Dimas) and Jane Harman (D-Venice), would make the increase retroactive to Jan. 1, 2008, affecting five banks, including IndyMac.
David Cohn of Port Charlotte, Fla., said bank employees offered him detailed advice on how to set up a revocable trust account that he believed was insured for $200,000 because he listed two beneficiaries, his mother and his 15-year domestic partner.
After the failure, he discovered that his partner did not qualify as a beneficiary under FDIC guidelines at the time.
The Whittier Public Library Foundation lost about $40,000 because an IndyMac branch manager said two separate accounts would be fully insured, said Raymond L. Schmidt, the foundation's treasurer.
"The IndyMac branch management’s advice was wrong," Schmidt said. "They did not understand the details of the FDIC rules."
-- E. Scott Reckard