IndyMac Bank Officially Fails
IndyMac Bank has officially failed. The FDIC has swooped in and taken over to stabilize operations while a buyer is found. The $8 billion dollar cost to its insurance fund makes the IndyMac collapse the 2nd largest in U.S. history. An epic run on deposits totalling $1.3 billion in the past 11 days contributed to the failure.
Earlier this week the California lender shuttered its mortgage operations amidst the credit crunch. It had hoped to survive the downturn by re-tooling and waiting it out. Not even three days later it has been taken over by the FDIC.
“This institution failed today due to a liquidity crisis,” OTS Director John Reich said. “Although this institution was already in distress, I am troubled by any interference in the regulatory process,” he said.
That interference was a comment made by Senator Schumer (D) of New York questioning the liquidity of the bank. His concerns have turned prescient, though some may argue they were simply self-fulfilling. Regardless, this turn of events is quite a shock to the industry and suggests no lender is safe from insolvency. Wachovia, Washington Mutual and even Wells Fargo top the list of future banks that could fail under multiple pressures brought on by the credit crisis and continued downward housing prices.
With this bank failure, one of the key assets the lender retained is now gone. The mortgage servicing business and reverse mortgage origination were the remaining two. They will now be set on the auction block to be sold to the highest bidder. One recently formed mortgage company has made an offer on the recently closed IndyMac mortgage branches. Maybe they’ll want some bank branches as well?