Posted on 07/15/2008 10:11:23 AM PDT by BGHater
Five banks have gone into receivership this year, the latest of which is IndyMac which became the largest OTS-regulated savings and loan to fail and second-biggest financial institution to close behind Continental Illinois in 1984, according to the FDIC.
Nonetheless, the FDIC is very fond of saying "No saver has ever lost a dime in federally insured deposits."
That's fine and dandy but inquiring minds are looking ahead and asking "How much uninsured money is at risk, not just at IndyMac but in the entire system?"
It's a good question, but first let's dig a litter deeper into what is happening at IndyMac.
IndyMac Answer Sheet
The FDIC has a Failed Bank Information Answer Sheet on IndyMac to answer depositor questions. Here are answers to 3 questions of general interest you may not know.
2. I am a deposit broker or I have a deposit through a broker. What do I need to do?Clearly the process is messier if you are holding CDs or deposits through a broker.
If you are a customer who has an IndyMac Bank deposit through a broker, you must contact your broker with any questions. Once the FDIC receives a balanced investor file along with all the required documentation, from your broker, your insured funds will be wired to them on your behalf.
4. Will I collect my uninsured deposits?
If it is determined that you have some uninsured funds, the FDIC will mail you a Receiver Certificate. This certificate entitles you to share proportionately in any funds recovered through the sale of the assets of IndyMac Bank. You will eventually recover some of your uninsured funds. Of course, you will receive immediate full payment for your insured amount by transfer to IndyMac Federal Bank or from your broker. In addition, the FDIC will pay uninsured depositors an advance dividend of 50% of your uninsured deposit.
For an explanation of the dividend process go to FDIC Dividends from Failed Banks.
11. Will I continue to earn interest at the same rate?
Yes, interest will continue to accrue at the contract rate on all non-broker deposits. If you deposited funds through a broker, the interest will accrue and be paid through Friday, July 11, 2008.
"You can count on us" was their slogan. Not quite. IndyMac Bancorp Inc. had $1 billion of uninsured, unsecured, and unprotected consumer deposits at stake. The 10,000 uninsured depositors will get 50 cents on the dollar now and wait for the rest.The rest of the article contains an interesting history of IndyMac, started in 1985 by by Angelo Mozillo and David Loeb, founders of Countrywide, as Countrywide Mortgage Investment and then spun off in 1997 as an independent bank making mostly Alt-A mortgages too big to be sold to Fannie Mae or Freddie Mac.
IndyMac is a much bigger version of last September's failure of Alpharetta, Ga.-based NetBank, which had $109 million of uninsured deposits at the time of its failure. Uninsured NetBank depositors got 50 cents on the dollar and a conservator's certificate for the rest. Four other banks failed this year and uninsured depositors have received no immediate reimbursement.
This time the stakes are much higher. IndyMac's uninsured depositors' balances are about 10 times that of NetBank's -- 10,000 uninsured depositors with a total of $1 billion in deposits. The average payoff over the past 12 years has been 72 cents on the dollar. It can take years to collect whatever is left for the uninsured depositors.
Considering that this seems to be a “Katrina” of financial disasters / crises, how come no positive comments in the press or Congress on how well and orderly and seamlessly Bush administration and Federal Reserve are handling the shutdown and “liquidation” of problem institutions to stem the wider spread and panic... as opposed to entirely irresponsible actions of some in Congress, like Sen. Chucky Schumer who caused a run on the bank and otherwise potentially unnecessary FDIC involvement in IndyMac.
>>>Deposits, from line 17 are $6,840.40 Billion ($6.84 Trillion).
~snip~
Inquiring minds will not stop there. They want to know how much actual bank cash is on hand if there is a run on the banks. For that we look on line 14. The answer is $273.7 billion.<<<
Well, if I did my math right, then the actual bank cash on hand is 4% of deposits (.0400122%).
Ain’t fractional reserve banking simply grand!?!
I calculated this when I was back in school in the 70s, and if memory serves me correctly, it was 1.2% back then.
This is actually an old story with new, updated numbers. The doom-and-gloomers and the gold bugs have been hawking this story since at least the 60s.
If we are indeed on the cusp of a downturn on the Kondratieff Wave, then all else, it appears, is moo (as Joey Tribianni would say), but I don't think there is enough empirical data to support the actual existence of the Wave.
But we shall see....
CA....
Yep, IIRC the Fed changed the reserves requirement to 4% in the 80’s in an effort to strenghten the industry.
Why were these institutions not caught before they reached crisis level?
No poor people will lose anything. No smart people will lose anything. Rich stupid people will lose half of their deposit over $100,000.00 in a single account.
There was no reason for a run on the bank except for stupid people listening to one stupid senator.
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