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OneWest Bank

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IndyMac Bank
Company typePublic (NYSE: IMB)
IndustryBanking
Founded1985 as Countrywide Mortgage Investment
DefunctJuly 11, 2008
FateConservatorship
HeadquartersPasadena, California, US
SubsidiariesIndyMac Bank
Financial Freedom
New York Mortgage Company
Barrington Capital Corporation

IndyMac Bancorp, Inc. was the holding company for IndyMac Bank, FSB, the largest savings and loan in the Los Angeles area and the seventh largest mortgage originator in the United States.[citation needed] IndyMac Bank, operating as a hybrid thrift/mortgage banker, provided financing for the acquisition, development, and improvement of single-family homes. IndyMac Bank also provided financing secured by single-family homes and other banking products to facilitate consumers' personal financial goals. Its collapse on July 11, 2008 was the second[1] or third[2] largest bank failure in United States history, and the largest regulated thrift failure.[3]

History

The company was founded as Countrywide Mortgage Investment in 1985[4] as a means of collateralizing Countrywide Financial loans too big to be sold to Freddie Mac and Fannie Mae. In 1997 Countrywide spun off IndyMac as an independent company.[2]

IndyMac Bancorp expanded its business and national presence by acquiring Financial Freedom, an originator and servicer of reverse mortgage loans, on July 16, 2004, New York Mortgage Company, an East Coast mortgage bank, on April 2, 2007, and Barrington Capital Corporation, a West Coast mortgage bank, in September 2007.

IndyMac Bancorp corporate Headquarters is located in Pasadena, California. Its name is a contraction of Independent National Mortgage Corporation; "Mac" is an established contraction for "Mortgage Corporation", as in "Freddie Mac", the very widely used synonym for Federal Home Loan Mortgage Corporation.

Collapse

Wikinews has related news:

On June 26, 2008, the release of several letters by Senator Charles Schumer (D-NY) urged several bank regulatory agencies to take steps to prevent IndyMac's collapse.[5] The letters set off a bank run: IndyMac depositors, fearing for the worst, sought to withdraw their funds from the ailing bank. Regulators and others in the financial sector quickly criticized Senator Schumer for publicly releasing his letter, which acted to further destabilize the bank. They added that the FDIC and Office of Thrift Supervision (OTS) "do not comment on open and operating institutions", and "Dissemination of incomplete or erroneous information can erode public confidence, mislead depositors and investors, and cause unintended consequences, including depositor runs and panic stock trades. Rumors and innuendo cause damage to financial institutions that might not occur otherwise and these concerns drive our strict policy of privacy." Schumer and economic experts defended the publication of the letter, saying that it only described, rather than caused, an inevitable and coming collapse[6]

In the eleven days that followed the letter's release, depositors took out more than $1.3 billion, regulators said. This sudden withdrawal of insured funds caused a liquidity crisis at the bank. In ordinary times, a bank would borrow money to keep itself liquid, using the Federal Reserve and capital markets to raise the ready cash to meet depositors' demands.

Facing both liquidity and capital constraints, on July 7, 2008, IndyMac announced that it had closed both its retail lending and wholesale divisions, halted new loan submissions, and cut 3,800 jobs.[7] The bank reported a sharp increase in the number of depositor withdrawals following its announcements in the wake of Senator Schumer's remarks on the bank's ability to survive the mortgage crisis.[8]

On July 8, IndyMac announced the sale of its Retail Lending Group to Prospect Mortgage.[9] That day, the bank's shares closed at $0.44 in trading on the New York Stock Exchange, a loss of over 98% from its high of $50 in 2006.[10] Additionally, analyst Paul J. Miller Jr. cut his price target on IndyMac to $0 from $1, rating the company's share price "Underperform".[11] On July 9, Standard & Poor's cut IndyMac's counterparty credit risk rating to "CCC", just a few steps above default, from "B", the fifth highest junk level, and said it may cut them again.[12] The following day, the bank's shares reached a 52-week closing low of $0.31.[13]

On July 11, 2008, citing liquidity concerns, IndyMac Bank was placed into conservatorship by the Federal Deposit Insurance Corporation. A bridge bank, IndyMac Federal Bank, FSB, was established to assume control of IndyMac Bank's assets and secured liabilities (such as insured deposit accounts), and the bridge bank was put into conservatorship under the control of the FDIC. The FDIC plans to reopen IndyMac Federal Bank, FSB on Monday July 14, 2008. Until then, depositors can access their insured deposits through ATMs, their existing checks, and their existing debit cards. Telephone and Internet account access will be restored on Monday, when the bank reopens.[14][15][16] The FDIC has declared a special advance dividend to the roughly 10,000 depositors with funds in excess of the insured amount of 50% of their uninsured funds[3]

With $32B in assets, IndyMac Bank is one of the largest bank failures in United States history, after financial institutions Continental Illinois National Bank[14][1] which failed in 1984 with $40 billion of assets and American Savings & Loan Association of Stockton, California, failing in 1988[2] due to large losses in mortgage-backed securities.[17]

References

  1. ^ a b Kristof, Kathy M. (2008-07-12). "IndyMac Bank seized by federal regulators". Los Angeles Times. {{cite web}}: Unknown parameter |coauthors= ignored (|author= suggested) (help)
  2. ^ a b c Paletta, Damian (2008-07-12). "Crisis Deepens as Big Bank Fails: IndyMac Seized In Largest Bust In Two Decades". Wall Street Journal. {{cite web}}: Unknown parameter |coauthors= ignored (|author= suggested) (help)
  3. ^ a b Veiga, Alex (2008-07-12). "Government shuts down mortgage lender IndyMac". Associated Press (Newsday). Retrieved 2008-07-12.
  4. ^ Lacter, Mark (2008-07-11). "IndyMac taken over". LA Biz Observed. Retrieved 2008-07-12.
  5. ^ "Schumer: concern over IndyMac stability". Associated Press. 2008-06-26. Retrieved 2008-07-11.
  6. ^ "Regulators to Schumer on IndyMac: Please shut up". Los Angeles Times. 2008-07-02. Retrieved 2008-07-11.
  7. ^ "IndyMac stops new loans, to cut work force by half". Associated Press. 2008-07-07. Retrieved 2008-07-08.
  8. ^ "Struggling Indymac Says Depositors Pulling Cash". Reuters. 2008-07-08. Retrieved 2008-07-08.
  9. ^ Yan, Ellen (2008-07-08). "Employees await word of fate after IndyMac deal". Newsday. Retrieved 2008-07-10.
  10. ^ Dash, Eric (2008-07-09). "Mortgage Lender Faces Rush to Withdraw". The New York Times. Retrieved 2008-07-10.
  11. ^ "IndyMac Bancorp shares dip; analyst sets $0 target". Associated Press. 2008-07-08. Retrieved 2008-07-11.
  12. ^ "S&P cuts IndyMac's ratings deeper into junk". Reuters. 2008-07-09. Retrieved 2008-07-11.
  13. ^ "Yahoo! Finance Quotation for NYSE:IMB". Retrieved 2008-07-10.
  14. ^ a b "IndyMac Taken Over By Regulators". Reuters. 2008-07-11. Retrieved 2008-07-11.
  15. ^ Wagner, Evan (2008-07-11). "FDIC Notification to All Employees" (PDF). IndyMac Bank. Retrieved 2008-07-11.
  16. ^ "Federal Regulators Close California Mortgage Lender". Fox News. 2008-07-11. Retrieved 2008-07-11.
  17. ^ Jerry W. Markham. A Financial History of the United States. p. 169. {{cite book}}: Unknown parameter |retrieved= ignored (|access-date= suggested) (help)

External links

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