Early this morning, IndyMac customers began lining up at company headquarters in Pasadena California to withdraw their funds. This in reaction to the news that the bank had failed, and that the FDIC had taken over.
My first thought was that these were overly fearful depositors, because the FDIC was going to swoop in and guarantee every dollar that had been deposited. Wrong:
Yet not all customers would be able to access all of their funds. Customers with $100,000 or less in deposits or with $250,000 or less in a retirement account would have full access to their funds, which are insured by the federal government.
There are, however, an estimated 10,000 IndyMac depositors who had a collective $1 billion over federal insurance limits. In an unusual move, the FDIC said it would give those customers access to 50% of their uninsured deposits. Any additional payments would be made only if the sale of IndyMac assets proved sufficient.
Over eighty percent of IndyMac stock is institutionally owned, so small investors may not be overly damaged by it’s plummeting stock price, which is currently fifteen cents, and is targeted for zero by one prominent analyst. But some savings account and retirement account customers may be in serious trouble.
This may be just a preview of coming attractions:
IndyMac is the fifth U.S. banking company to fail this year, and the largest since the 1980s savings-and-loan crisis.[...]
Gerard Cassidy, an analyst at RBC Capital Markets, on Sunday estimated that 300 U.S. banks might fail over the next three years because of credit losses and tight capital markets.
I learned about this kind of thing in my US History classes. The legacy of the Hoover administration, and the apparently the blueprint for the Bush administration.