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More News on IndyMac and Its Current CDs

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This Bankrate article has an interview with FDIC spokesman David Barr with some interesting experiences of the closure and some useful details about how those with over the FDIC limits will be compensated. He described some irrational behavior of people who knew about the protection of the FDIC, but still came to get their money. Here's one example he described:
One couple flew in to stand in line to get their money and flew home. I couldn't imagine what an airline ticket with two days' notice to Los Angeles cost.

The spokesman goes into detail to describe how those with uninsured deposits may be paid after the intial 50%. At the start of his answer he describes the current FDIC plans for IndyMac:
We're looking at about 90 days to sell the bank to another bank or banks, depending on how the bids come in, so we're looking at mid- to late October.

The spokesman also explained how the FDIC was handling the issues of other banks not honoring IndyMac cashiers checks and what's going to happen to HELOCs and loans.

Update 7/29/08: Here's an interesting NY Times article describing the events at IndyMac before the closure.

IndyMac Federal Bank Still Offering Competitive CD Rates

Since it appears that IndyMac will be sold in the next few months, I was wondering what impact this would be for those who open IndyMac's current CDs. The new FDIC IndyMac (IndyMac Federal Bank) is still offering some very competitive CD rates including a 4.15% APY 9-month CD. This is actually 10 basis points higher than what was offered on the first Monday after the closure. Perhaps the FDIC is trying not to lose too many deposits to help the future sale.

I just did a chat session with the IndyMac CSR, and I asked what would happen to the CD if IndyMac is sold to another bank during this time. According to the CSR, the CD would remain the same. Update 7/29/08: Based on a reader's comment, I called for confirmation on this issue. The CSR this morning said that the new bank could choose to close the CD. Note, the number listed at the website (800-750-8521) doesn't seem to work. I was able to get through using the one that the CSR in the chat session provided (800-998-2900).

According to the CSR, the online CD opening process is the same as it was before the closure. Please refer to my April IndyMac post for more details about the CDs and my experience opening and closing an IndyMac CD.

Deposits at this new IndyMac Federal Bank are FDIC insured (see FDIC's Q&A).

IndyMac and FDIC Links

Here's my IndyMac page with all of my recent IndyMac closure posts.

For details and issues regarding using trusts to extend FDIC coverage, please refer to this post. I just updated this post with a recent commenter's experience in trying to get back his IndyMac funds that were over $100K but were insured via revocable trusts.

Please see my Facts about FDIC and NCUA post for more general info and references.

  Tags: CD rates

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Comments
6 Comments.
Comment #1 by Anonymous posted on
Anonymous
Regarding opening a CD at IndyMac Federal Bank. Well, my CD there matured today. I called in and asked about their rates (I already knew). I then said I could get better, that Vineyard Bank (which is about to go under) was offering a 6-month CD at 4.50 APY. IndyMac negotiated and matched that rate.

So, I rolled my CD over to a 6-month one at 4.50 APY.

And I note, this was NOT new money and it was significantly less than $100,000.

I had figured they were desperate to keep whatever money they had - so they would actually have a bank to sell, not just leftover real estate of the branch buildings.

And re what happens if and when they are sold, the CSR, of course, gave you wrong info. They said the same to me -- and I corrected them. In fact, when the FDIC sells a bank, the new bank can dissolve your account.

However, it is very unlikely the new bank would dissolve your account since doing so pretty well guarantees the account holder will pull their money out -- and that is NOT what the buying bank paid for, an empty bank account. But even if they did dissolve your account, we are now looking to the pressure being for higher interest rates, so if they sold the bank in three months and the new bank dissolves your account, you will probably be able to get the same elsewhere or get more!

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Comment #2 by Anonymous posted on
Anonymous
The FDIC spokesman is really funny. Since he knew that even banks did not honor indymac's cashier check. Why is it so hard for him to understand that people flew there to get their money?

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Comment #3 by Anonymous posted on
Anonymous
I decided to pull my money from the bank and asked them to send me a check being that their ACH's were not going through and was told I would have to wait 7 business days to have my funds sent out. Woo Hoo 2 more days to go.

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Comment #4 by Anonymous posted on
Anonymous
Interesting story in New York Times today about cause of IndyMac failure (basically poor risk management which was euphemistically described as management "optimism"). Story also chronicles days leading to FDIC takeover. http://www.nytimes.com/2008/07/29/business/29indymac.html.

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Comment #5 by Banking Guy (anonymous) posted on
Banking Guy
@ anonymous 4:22 PM, July 28, 2008

Thanks for the info. As many commenters have mentioned, you can often get more knowledgeable IndyMAC CSRs in the morning. The morning CSR did confirm that the new bank could decide to change the terms of the CD.

@ anonymous 8:57 AM, July 29, 2008

Thanks for the NY Times link. I added the link in the post. I found the last part particularly interesting when it was reported the OTS official told the IndyMac president "We'll talk to you on Friday". That's something a bank president never wants to hear from the Feds.

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Comment #6 by Anonymous posted on
Anonymous
U know it isnt so silly that people would freak, what if oil when to 200 the next day, then 500? When Bear Sterns failed the fed freaked and gave 30b basically interest free. Who knows what could happen? The whole system is built on trust - that the US, and other Western nations can repay these debts, that oil is not running out, etc. who really knows what could happen? No doubt everything wont fall apart but really can be completely certain either? When Rome fell it took 100s of years for things to degrade, but we are much more dependent upon oil thus civilizations/population centers today are not independent at all and things can colapse much faster. Most likely not, but who really knows, right? Such things are not imposible and certainly more posible than one would have thought 10 years ago....

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