INDYMAC Bancorp Inc became the second-biggest federally insured financial company to be seized by United States regulators after a run by depositors left the California mortgage lender short on cash.
The Federal Deposit Insurance Corp will run a successor institution, IndyMac Federal Bank FSB, starting this week, the Office of Thrift Supervision said in an e-mail last Friday. The regulator blamed US Senator Charles Schumer for creating a "liquidity crisis" after a letter on June 26 in which he expressed concern that the bank may fail.
The Pasadena, California-based lender specialized in so-called Alt-A mortgages, which didn't require borrowers to provide documentation on their incomes. The demise adds to the crisis caused by the subprime collapse and may mean regulators will have to raise more money to support the federal deposit insurance program that repays customers when a bank fails, Bloomberg News said.
"IndyMac is the vanguard, the precursor of more stuff coming," said Christopher Whalen, managing director of Institutional Risk Analytics, a market research company in Torrance, California. "It's not surprising to see IndyMac resolved. What you have to ask is what's coming next. It's going to be a wave of medium to bigger-than-medium institutions."
IndyMac's home state, where Countrywide Financial Corp was also located before it was bought two weeks ago, has been among the hardest hit by foreclosures. California ranked second among US states, with one foreclosure filing for every 192 households in June, 2.6 times the national average.
The lender racked up nearly US$900 million in losses as home prices tumbled and foreclosures climbed to a record. IndyMac becomes the largest OTS-regulated savings and loan to fail, the FDIC said.
Mortgages serviced by IndyMac will be turned over to the FDIC and the regulator will be reaching out to customers immediately, Chairman Sheila Bair said on a conference call last Friday. Customers had access to funds last weekend via automated teller machines and electronically and by phone starting this week.
The FDIC aims to sell IndyMac within 90 days as a single entity, Bair said. If that doesn't work, it will be sold off in pieces, she said.