IndyMac Bank Seized by the Feds

UPDATE: Don't stand in line, people, it's dumb.

Another purveyor of problem mortgages goes swirling down the drain:

The federal government said it took control of troubled IndyMac Bank today, in what regulators called the second-largest bank failure in U.S. history.

The Office of Thrift Supervision in Washington, the chief regulator of Pasadena-based IndyMac, said it transferred control of the $32-billion bank to the Federal Deposit Insurance Corp.

The FDIC will reopen the bank on Monday as IndyMac Federal Bank, the OTS said.

"Depositors will have no access to banking services online and by telephone this weekend, but will continue to have access to their funds this weekend by ATM, through other debit card transactions and by writing checks," the OTS said. "Online banking and phone banking services will be available again on Monday."

IndyMac's failure had been widely expected in recent days, as its stock has plummeted to mere pennies a share and some nervous depositors have been pulling their funds.

The bank has been reeling from losses on defaulted mortgages made at the height of the housing boom.

"The OTS has determined that the current institution, IndyMac Bank, is unlikely to be able to meet continued depositors' demands in the normal course of business and is therefore in an unsafe and unsound condition," the agency said in a statement.

IndyMac's failure is second only to the 1984 failure of Continental Illinois Bank, which had assets of $40 billion at the time.

Boy, this brings back some memories. In 1985 I was an Assistant Vice President with Beverly Hills Savings. Our corporate offices were in Mission Viejo, CA, and at about 4pm on Tuesday, April 16th I saw a strange sight coming out of our underground parking garage. Men with briefcases were coming up the stairs two-by-two like animals off the ark. They were federal regulators seizing our institution.

That occurred during the heart of the Savings and Loan meltdown, and because our loan problems were in the $1 billion+ dollar neighborhood and so many S&Ls were tanking, the government couldn't afford to just shut us down and pay off the depositors. Instead they created a special management consignment program that put our S&L under the management of another one (which failed a couple of years later). By all rights I should have been out of a job that day, but because of the management consignment program and an eventual sale to a bank in Michigan, I was there another 10 years until the company was finally sold to a California S&L.

Good times....good times.