Dedicated to Deposits: Deals, Data, and Discussion

IndyMac Bank, the fifth FDIC-insured failure of the year

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The FDIC just came out with this press release. Here's the first part of it:
IndyMac Bank, F.S.B., Pasadena, CA, was closed today by the Office of Thrift Supervision. The Federal Deposit Insurance Corporation (FDIC) was named conservator. The FDIC will transfer insured deposits and substantially all the assets of IndyMac Bank, F.S.B., Pasadena, CA, to IndyMac Federal Bank, FSB. Brokered deposits will be held by the FDIC and those insured deposits will be paid off when the insurance determination is complete. IndyMac Bank, FSB had total assets of $32.01 billion and total deposits of $19.06 billion as of March 31, 2008. As conservator, the FDIC will operate IndyMac Federal Bank, FSB to maximize the value of the institution for a future sale and to maintain banking services in the communities formerly served by IndyMac Bank, F.S.B.

More details are available at this FDIC page.

Hopefully, no one who reads this blog had deposits over the FDIC insurance limits. Here's what the FDIC says about the uninsured funds:
The FDIC will pay uninsured depositors an advance dividend equal to 50 percent of the uninsured amount.

I'll post more on this story as more news is released.

Update:

If you're a depositor with under a $100K, there's nothing you have to do. According to this FDIC FAQ, you'll have to wait to Monday to access your account. I have $250 in an Indymac savings account that I left after my CD matured. I expect to log in on Monday, and see the account in the same shape as when I last logged in.

For those with Indymac Bank CDs, here's a relevant FDIC FAQ:
28. Will I incur an early withdrawal penalty if I close my CD before maturity?

No. You may withdraw funds from any transferred account without an early withdrawal penalty until you enter into a new deposit agreement with IndyMac Federal Bank. This can be done by either renewing your CD or making a deposit to, or a withdrawal from, your account.

It looks like all depositors may be required to enter into a new deposit agreement. I'm not sure how will this affect the rates. Also, I can't find any mention about those who may have just opened a CD. I don't know if they'll be treated just like any other CD customer. From my own experience, I know it can take weeks for a new Indymac CD application to be completed and funded.

Here's the full list of FDIC FAQ's on Indymac.

News stories are started to come out. From the LA Times, Indymac Bank was the second-largest bank failure in U.S. history. From the LA Business Journal:
Wade Francis, president of Long Beach-based Unicon Financial Services, said there is "very little" chance that uninsured depositors will get all their money back because IndyMac had a large number of home loans, which will be difficult to sell off. ... Francis also said that by transferring assets to a federal bank, it is likely that regulators could not find a buyer and that they will begin selling off the bank's assets.

Update 7/12/08: A reader just forwarded me this link to the OTS press release. It's interesting to see how it specifically mentions Senator Schumer's letter:
The immediate cause of the closing was a deposit run that began and continued after the public release of a June 26 letter to the OTS and the FDIC from Senator Charles Schumer of New York. The letter expressed concerns about IndyMac’s viability. In the following 11 business days, depositors withdrew more than $1.3 billion from their accounts.

Update 7/12/08: For those who had over $100K in Indymac, please refer to my post extending FDIC insurance over $100K to see if you may qualify for coverage of over $100K. You may qualify for more than $100K in deposit insurance if your accounts included IRAs, joint accounts and POD accounts. Please refer to the FDIC guide and the FDIC insurance estimator for the official information.

Update 7/15/08: For those with Indymac CDs, Sam at BestCashCow describes what he has been told by the FDIC. CD depositors have several options:
They will have six months to cash out the CDs with no penalty or they can keep them at the bank. If they keep them at the bank the FDIC will continue to pay the contract interest rate. But, if another bank comes in and buys Indymac, as I'm sure the FDIC hopes, the bank has the right to adjust the rate paid on the inherited CDs. In that case, the new bank will send a notice to all remaining CD holders. She said it wasn't clear if CD holders would have an opportunity to cash out their CD penalty free at that point.

Update 9/11/08: A reader who held an account at Indymac Bank over $100K and still has a loss after the FDIC payout of 50 cents on the dollar for the amount over the FDIC limit, has been wondering if account holders in this situation can file a claim in the bankruptcy of the holding company of Indymac Bank, which is called 'Indymac Bancorp'. I asked the FDIC about this and they said they "did not know what the basis of the claim would be", but did say "consult an attorney".

For those you who wish to research & pursue this possible recovery option, I can provide the following details:

The Bankruptcy claim number for Indymac Bancorp is : 2:08-BK-21752-BB (Chapter 7)
Filed in Los Angeles US Bankruptcy Court: 255 E. Temple Street, Room 940, Los Angeles, CA. 90012

Deadline to File a 'Proof of Claim' Form : November 26, 2008
Claim Forms can be obtained online at: www.cacb.uscourts.gov

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Comments
61 comments.
Comment #1 by Anonymous posted on
Anonymous
wow

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Comment #2 by Anonymous posted on
Anonymous
Gee, I just opened a 1 year CD yesterday morning through ACH. The APY is 4.45%, then it became 4.15% APY at night. I was wondering what's going on but couldn't get hold of a representative after on hold for 30 minutes. The money is not withdrew from my checking account yet. Wonder what will happen:
- Will they just not withdrew the money and let me know the CD won't be opened
- Will they still open it (either with 4.45% or 4.15%APY)? What's the opinion out there?
- When will I know?

Any opinions out there? I will update when I get any information about it.

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Comment #3 by Anonymous posted on
Anonymous
I did the research myself. Knew it would shut down.

Kept funds at Countrywide, which is now 3.55% but merged with Bank of America so all is safe. We will see who the new rate leader is after all the crap settles.

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Comment #4 by Anonymous posted on
Anonymous
I just found I can no longer log in to my account (id/password doesn't seem to be accepted).

Anything I as a depositor have to do at this point

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Comment #5 by Anonymous posted on
Anonymous
What happens to indymac's bank owned properties now that they were selling? Will they be liquidated at bargain basement prices for quick cash?

Im curious how one would go about buying these now that the bank has gone under.

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Comment #6 by Anonymous posted on
Anonymous
I just realized the FDIC will acquire all these properties and likely put them on the website like it did for another bank it took over.

That makes the government a huge owner of homes instead of the banks.

Question is, will the government push these properties out to eliminate the inventory.

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Comment #7 by Anonymous posted on
Anonymous
I lucked out twice vis a vis this bank. I almost went in twice for a CD, then pulled back. It's not a huge deal; just saved myself a bit of inconvenience. The FDIC will make everyone's insured deposits good, probably very, VERY fast. Anyone who went beyond the FDIC limits at this bank deserves their loss. I suspect there are scant few such individuals here. Certainly Banking Guy got his counsel right all the way. All you had to do was listen to him. The real story today is Freddie and Fanny. If they are still alive on Monday it will be news. Bear Stearns didn't make it through the weekend recently in a similar situation. If F&F go under, fasten your seat belts.

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Comment #8 by Anonymous posted on
Anonymous
While I greatly appreciate this site and the time its author spends on calling banks, logging all of the various data, and the YMMV warnings given, when a bank failure is clearly imminent, it should absolutely not continue to post rate deals. I feel bad for those of you that did just open accounts with Indymac Bank. As long as you stayed below the 100k amount, you should be covered. FDIC has been pretty quick in the recent past to re-establish accounts.

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Comment #9 by Jeff (anonymous) posted on
Jeff
I was close to opening accounts also, but thanks to Wachovia rates I was saved the hassle.

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Comment #10 by DollarBill (anonymous) posted on
DollarBill
From what I'm rading on the FDIC website, it almost sounds like it will be business as usual on Monday providing your deposits are fully insured and are not brokered deposits.

In addition, it sounds like CD's will continue earning interest at the contracted rate, according to the Q&A page:

"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."

So the way I read this is if you have one of those 4.45% CD's at Indymac Bank, Indymac Federal will continue paying the the same rate so long as you're insured and not brokered.

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Comment #11 by Anonymous posted on
Anonymous
Banking Guy I disagree with the above to the max. First, as smart as you are, neither you nor anyone else can know with certainty whether a bank failure is immanent. Smart people know that, and others should not come here looking for a nursemaid. So please continue to provide us with the data you always provide. You report, WE will decide. I neither need nor want "nanny state" care. And I surely don't like it, either. This country, which was built by rugged individualists, is now suffocating beneath a plethora of weak-kneed pantywaists and cry babies. It is sickening.

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Comment #12 by Jeff (anonymous) posted on
Jeff
Here here to the above comment. Banking Guy provides us information and it is each person’s INDIVIDUAL RESPONSIBILITY to assess the info and proceed from there.

Keep up the Excellent job Banking Guy!!

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Comment #13 by Anonymous posted on
Anonymous
I just opened a 1 year CD yesterday as well with the APY 4.45%...tried to call just now after I tried opening up my account on the website and discovered what happened...but I was told that I have to call tomorrow to speak with a representative to set up an appointment with one of the bankers (on the phone) to talk with them about canceling my CD or what I can do. My funds have not been withdrawn yet from my banking account to fund the CD...It seems so stupid to call tomorrow simply to arrange for an appointment with a banker (on the phone) for Monday. I will update with any new information.

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Comment #18 by calwatch (anonymous) posted on
calwatch
Office of Thrift Supervision Press Release

Basically, the Schumer letter essentially led to one of the bigger bank runs in history, and created a self fulfilling prophecy of bank failure. Sure, the Downeys, Fremonts, WaMus, etc. aren't in any better shape, but when depositors lose confidence, it is a pretty quick drop to the bottom.

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Comment #19 by Anonymous posted on
Anonymous
VII. Priority of Claims
In accordance with Federal law, allowed claims will be paid, after administrative expenses, in the following order of priority:
Depositors
General Unsecured Creditors
Subordinated Debt
Stockholders

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Comment #20 by Anonymous posted on
Anonymous
Like I said in my post the other day "their rates aren't that high, at least not for the amount of hassle possibly involved".


Banking guy, don't listen to the fool who thinks you shouldn't report on all bank deals. 99% of us are intelligent enough to make our own decisions and it is much easier with the info you provide.

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Comment #21 by Anonymous posted on
Anonymous
Bank Guy, we like your blog! Keep up the good work!!!

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Comment #22 by Anonymous posted on
Anonymous
I don't think anonymous at 4:29 was criticizing Banking guy. I believe he was critizing Indymac. Just a confusing sentece.

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Comment #23 by Anonymous posted on
Anonymous
To: Anonymous, 4:29, quote: "it should absolutely not continue to post rate deals."

It depends on what "it" is? Sound familiar? If you mean, the entity (bank) should not post deals, why? They were trying to raise capital.

Don't panic. If you were over FDIC limits, why? FDIC will be there for those within the FDIC limits. Good luck. And, God bless.

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Comment #24 by Anonymous posted on
Anonymous
Nothing is for certain. But bottom line this situation is not looking all that bad today for IMB depositors. Absolute worst case their money is returned. That's an inconvenience but far from a disaster. Best case, depositors are permitted to keep their very high interest rate accounts, at a bank now secured by no less an entity than the FDIC. That's not a shabby outcome at ALL!! Persons idiotic enough to have invested north of the FDIC limits, of course, will not do this well. Idiots do not deserve to do well. But everyone else, and that's the vast majority of Banking Guy's readers, is going to come out intact or better.

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Comment #25 by Anonymous posted on
Anonymous
i had a $50k cd with 9 months left, earning 4% apy.

should i close it now, and move it somewhere else?

where?

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Comment #28 by Anonymous posted on
Anonymous
Thanks Mr. Charles Schumer for causing the premature demise and not allowing Indy to try and get it together. Hope you get back in life what you dish out.

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Comment #29 by Anonymous posted on
Anonymous
Everyone's talking above like no one would be foolish enough to keep above FDIC limit with Indy Mac... And I certainly did not...

But...here's the other piece of interesting info from the CNN article referenced above:

"According to the FDIC, 10,000 IndyMac customers could lose as much as $500 million in uninsured deposits."

No idea what portion 10,000 is out of IMB's overall deposit customer base... But 10,000 folks out presumably somewhat sizeable amounts of money is nothing to sneeze at... even if they eventually end up getting reimbursed at the promised 50% rate.

--John in Los Angeles

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Comment #30 by Anonymous posted on
Anonymous
Not according to this article :
http://www.bizjournals.com/atlanta/stories/2008/07/07/daily91.html

The FDIC announced the roughly 10,000 customers with uninsured deposits will receive their deposit amounts

So which one is right ??

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Comment #32 by Anonymous posted on
Anonymous
i had 500,000 on an individual account. sounds like i get 100,000 back, and 50% of the 400,000 left. Anybody have any thoughts as[other than havin more than 100,ooo] on what else i can recover?

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Comment #33 by Anonymous posted on
Anonymous
Does anyone know the general time lag on receiving brokered funds from a failed bank opposed to first party deposits. Anybody been through a closure before that has and idea regarding this?

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Comment #34 by routing (anonymous) posted on
routing
I have $90,000 CD in IMB.
Can I continue earning interest at the contracted rate?

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Comment #36 by Anonymous posted on
Anonymous
great post above.. i would add to your list: Downey Savings as well

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Comment #39 by Anonymous posted on
Anonymous
this is the 500,000 guy and no 200,000 does not kill me.

I still would like anyone who can do the math to tell me what they think I will get back. Two people listed on the account.

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Comment #40 by glxpass (anonymous) posted on
glxpass
[i]In news FDIC has mentioned they will cover insured money up to $100,000.
My questions is how about an account with two beneficaries that are under name revocable trust. IS FDIC going to cover that money or not?[/i]

Banking Guy added a 7/12 update to his post as a reminder that accounts in excess of $100K can be fully insured, depending on the type of ownership. In the simplest case, if you've one or more joint accounts with your spouse, then those accounts are covered up to $200K in total.

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Comment #41 by Anonymous posted on
Anonymous
glxpass.

Well, I don't have joint account. I have more than $100,000 in money market (saving account), but I have my parents as two beneficiary under (itf--> "in trust for") which is one type of revocable trust.
I was told by bank at that time that I am insured up to $200,000, because I have two beneficiaries and I checked that with FDIC website, however, I am not sure how they will deal with that, since they didn't talk about these kind of accounts in news.Maybe they didnt go in detail.

thanks for your reply.

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Comment #42 by Anonymous posted on
Anonymous
500k man, if you have that much $$$ you should be smarter than asking for advice from strangers regarding YOUR money from a message board. get off your lazy a$$ and call the FDIC to get your info. WOW i cannot beleive what i am reading from you.

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Comment #43 by Anonymous posted on
Anonymous
I think the 500k man was a troll!

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Comment #44 by glxpass (anonymous) posted on
glxpass
Anonymous, at 4:49pm:

I think you're fine. I was giving a simple case, but my point was that if your accounts are fully insured by the FDIC, then your money is fine. That's the purpose of FDIC insurance.

IMO, most banks and credit unions (the latter of which is covered by NCUA insurance, almost but not quite identical to FDIC coverage) just say 100K in coverage because it's too complicated for them to completely describe FDIC (and NCUA) insurance rules.

Still, the almost exclusive mention of 100K coverage by financial institutions causes unnecessary worries to those who have more than 100K in deposits and who have adequate coverage as described by you and me, for example.

The key concept is that before putting money into a deposit account in a particular financial institution, be aware of FDIC/NCUA insurance rules before exceeding a total of $100K in total balances at that financial institution.

You can use the FDIC Electronic Deposit Insurance Estimator and the NCUA Share Insurance Estimator for banks and credit unions, respectively (the credit union must have NCUA coverage; most, but not all do) in order to set up different deposit accout scenarios and to see if your deposits are covered.

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Comment #45 by Anonymous posted on
Anonymous
glxpass.

Thanks for useful website and your valuable time I checked the calculator and gave my information. It says I am fully insured, however, what makes me wonder is that, my parents live abroad and I am the only owner of account (i had told this to bank in the beginning and I was told there is no need for them to be here) having said that I am not sure if they will ask for any extra documents or they just issue money to owner.

Thanks again. Your info was quite a big help.

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Comment #46 by calwatch (anonymous) posted on
calwatch
The reason media says $100,000 is because it is easier, although the newspapers, such as the LA Times, do mention joint accounts and trusts. But, unless you specifically structured your account as a trust or with POD in the title, then you would be subject to the $100k per person limit.

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Comment #47 by Anonymous posted on
Anonymous
calwatch.

Thanks for your input.Do you have the link to LA Times talking regarding trusts?I was not able to find it.
yes, i do have it documented under ITF next to my parent's name.

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Comment #48 by Saagar (anonymous) posted on
Saagar
I have some 5k in this bank at around 4.8% in a CD which matures on August 26. Do you think I should cash it out right away or wait until the August 26 and get it at maturity...

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Comment #49 by Anonymous posted on
Anonymous
"I have some 5k in this bank at around 4.8% in a CD which matures on August 26. Do you think I should cash it out right away or wait until the August 26 and get it at maturity..."

You have a guaranteed 4.8% for the next 45 days. Where else are you going to get 4.8% on your money guaranteed for the next 45 days?

If there is some deal you have your eye on or if you want to lock in a longer-term rate now because you are afraid interest rates will drop between now and August 26, then this is an opportunity to cash in your CD early without penalty. But there is absolutely no reason to cash it in just because of the FDIC takeover. Your CD is safe and earning interest just as if nothing had ever happened. Unless you have some plan to use the money for something that will earn you a better return than the 4.8%, there is no rational reason to do anything.

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Comment #50 by Anonymous posted on
Anonymous
I thought this might be helpful for you guys:

http://www.fdic.gov/bank/individual/failed/indymac.html

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Comment #51 by Anonymous posted on
Anonymous
Wondering if


These bad loans were made worse by lenders trying their best to make loans to illegal aliens. Even now the banks advertise taking a loan to give your fifteen year old daughter a coming out (quinsineta) party!? How ironic. What a stupid thing to borrow money for... and it is still going on. The legal citizens get stuck with the bill while the lenders who made fat cash get bailed out and the illegal goes back to Mexico with a truck load of furniture that we will pay for!


Where is the journalist who will investigate where the money went? Who will uncover and expose the enormous influence these corporate monsters have exerted over OUR government?

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Comment #52 by Anonymous posted on
Anonymous
Geez, I know you're angry at this whole mess and you want to lash out at somebody and take your anger out on them, but blaming illegal aliens for this mess is ridiculous.

The guys who snuck across the border to butcher your meat, mow your lawns, babysit your children, pick your vegetables, buss your tables, and fix your roofs for cheap did not cause this problem.

Maybe they did borrow a little money to throw some parties or buy some furniture. But that had nothing to do with the massive failures we are seeing.

No, it was your completely legal native citizens sitting in their air conditioned offices on Wall Street (while the illegals picked vegetables in 110 degree heat in Arizona and Central California) who collected 8-figure bonuses for pulling off this scheme.

Don't get me wrong. We need to protect the borders and stop illegal immigration for many reasons. But don't use the poor and the weak (albeit illegal) as your whipping boys. Don't let the real crooks divert your attention.

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Comment #55 by Anonymous posted on
Anonymous
for the guy that said, hes getting 4.8%, what bank is that. i have 10K that i would like to get it in a cd.

question??
how much time should i put my money into a cd for..3, 6, 12, 18 or over two years to get more???

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Comment #57 by Greg (anonymous) posted on
Greg
I have a brokered CD with Indy that I got through Scottrade for 98k. It's set to mature on 08/15/2008. Do you guys have any idea when they'll be redeeming brokered cds? Scottrade mentioned possibly 4-6 weeks, I'm just wondering if anyone else heard otherwise from their broker.
Thanks

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Comment #58 by Anonymous posted on
Anonymous
anonymous N

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Comment #59 by Anonymous posted on
Anonymous
Indymac was told we could get our money in 24 to 48 hours. When I called to close all CD's, I was told to send either a fax with all my infor, or UPS, etc. I sent a fax. I have heard nothing. Amtrust Bank in Cleveland Ohio has some decent rates and I use them also. If you opened a CD and the funds are not withdrawn yet, you can cancel the payment through your bank. At least, I know you can if you wrote a check. They will go ahead and open the CD if they get the funds. I do not care to wait and see if they sell the bank and then maybe get a lesser rate. I will look elsewhere. Those rates were not all that great really.

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Comment #60 by Robert (anonymous) posted on
Robert
I would like to know how many people purchased a CD thru Scottrade since the beginning of 2008. You can contact me at:
fmco76@yahoo.com

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Comment #61 by Boby (anonymous) posted on
Boby
Hello. I find your blog very interesting. I think that everyone had something to do with banks. It is hard to choose a good and reliable one. After so many banks I had to deal with I should say that Indymac Bank is the best one. I learned about it from www.****edconsumer.com. Although the feedbacks about the company were not very positive I still ran a risk and went there.

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