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2nd Largest Bank Failure in USA History

Written by

John Hunter

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I commented on, WaMu Free Checking: The High 3.3% APY May Be Worth A Look, yesterday:

I agree it is worth considering. It has FDIC insurance. But the bank is not very stable. The stock price, for example, was above 40 in the last year. It is below 5 now. But as long as your entire deposit is covered by FDIC you are in safe (though if a bank goes under – not that likely – there can be a delay in getting your money). Normally a bank’s assets would be bought out by another bank.

And today I read of the second largest bank failure in the history of the USA, IndyMac Bank seized by federal regulators:

The Office of Thrift Supervision in Washington, the chief regulator of IndyMac, said it transferred control of the $32-billion bank to the Federal Deposit Insurance Corp. Branches will be closed over the weekend, but the FDIC will reopen the bank Monday as IndyMac Federal Bank, the OTS said.

Regulators said depositors would have no access to banking services online and by telephone this weekend, but could continue to use ATMs, debit cards and checks. Online banking and phone banking services are to resume operations Monday.

Federal authorities said based on a preliminary analysis, the takeover of IndyMac would cost the FDIC between $4 billion and $8 billion.

It is important to make sure your deposits are FDIC insured (in the USA), and to know the limits of the coverage.

FDIC Failed Bank Information Information for IndyMac Bank, F.S.B., Pasadena, CA

Principal and interest on insured accounts, through July 11, 2008, are fully insured by the FDIC, up to the insurance limit of $100,000. You will receive full payment for your insured account. Certain entitlements and different types of accounts can be insured for more than the $100,000 limit. IRA funds are insured separately from other types of accounts, up to a $250,000 limit.

IndyMac was a huge mortgage focused bank. Their stock price had fallen from a high of nearly $30 in the last year to below $5 in April, $2 in May and $1 in June. It is a very good thing we have the FDIC.

Related: Credit Crisis (August 2007) – Credit Crisis Continues – Homes Entering Foreclosure at Record

Comments

3 responses to “2nd Largest Bank Failure in USA History”

  1. Avatar
    Anonymous

    It is obvious that IndyMac is only the first of many. As the Credit Card default rate rises, many of the credit card banks will see their bottom crushed. There will be no new home loans, and no earnings from Credit cards. I see banks failing at a rate never before seen. It all goes back to taking apart the regulations that were placed on banks during the last depression. This Republican Crew continues to tout the mantra of lower taxes and less Government oversight, thus the mess we are in.

    Reply
  2. Anonymous Avatar
    Anonymous

    Who knows what other tribulations are ahead for these banks? Could this be another S&L crisis in the making?

    The news definitely hasn’t been good lately in many areas, but could be a time for contrarians to come out.

    I personally am not too concerned about any banks folding — usually somebody else comes by to buy them out.

    Reply
  3. FDIC Details Plan To Alter Mortgages at Curious Cat Investing and Economics Blog

    Ideally this type of action would not be necessary but since banks were allowed to degrade their standards so far and allowed to grow so large their failures threaten the economy some radical actions are being taken…

    Reply

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