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SFGate Article: Why wasn't IndyMac on the FDIC problem list?


This San Francisco Chronicle article has an interesting look at why Indymac wasn't on the FDIC's problem list. The FDIC had reported the following regarding this problem list:
As of the end of March, there were 90 institutions with total assets of $26.3 billion on the FDIC's Problem Bank List

Since IndyMac had assets of $32 billion, it's clear it wasn't on the list. As the article mentions, IndyMac's poor financial health was well known since 2007. It appears the FDIC was waiting on the Office of Thrift Supervision (OTS), IndyMac's primary regulator. They wanted to wait for OTS to finish its 6-month exam of IndyMac and release its final ratings. The exam ended in June, and apparently IndyMac was finally put on the list. The OTS spokesman quoted in the article repeated what the OTS claimed in its July 11th press release regarding 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. .... IndyMac was actively seeking to arrange a significant capital infusion or find a buyer. The recent release of the senator's letter undermined the public confidence essential for a financial institution and took away the time IndyMac needed to pursue a recovery.

The article does make the case that the regulators are behind in their ratings. One expert interviewed in the article said that the "problem list should be closer to 900 companies instead of 90." But even if the OTS and FDIC are behind, today's environment is still not as bad as it was in the 80's and early 90's when more than 1,600 FDIC-insured banks were closed or received FDIC financial assistance (FDIC source). The FDIC was able to cover all insured deposits even though it did cost the taxpayers. The important thing to note from all of this is to stay under the FDIC limits.

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.

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