While IndyMac was in trouble, it was not until June 26, 2008, when Senator Charles Schumer (D-NY) sent letters to the FDIC, the OTS and two other federal agencies that the troubled bank fell prey to a classic run on its assets that forced regulators to step in. In these letters Schumer expressed concern over IndyMac’s “financial deterioration and suggested that it posed significant risk to both taxpayers and borrowers.” According to the Los Angeles Time’s Kathryn Jean Lopez, on Friday, July 11, 2008, these concerns were leaked to the media pushing IndyMac’s failure along as depositors quickly pulled $1.3 billion dollars from its holdings in a two week period.

With IndyMac being one of the nation’s largest mortgage lenders it sent alarm throughout the financial world when it was learned on May 10, 2008, that they had suffered a loss of $184.2 million dollars in the first quarter of 2008.  This loss was a direct result of the decline of mortgage-based securities which made the company unprofitable, as well as, the fact that IndyMac discontinued lending to new construction projects last year as home building dried up. This in turn led to an announcement that IndyMac would no longer pay dividends on preferred shares of stock.

While this may have been a shock to many in the banking industry some of its previous customers, like E. Schmidt of CA says that it was no surprise to him. In a post on July 13, 2008, Mr Schmidt stated that “IndyMac provides low quality service and displays a serious lack of professionalism when dealing with customer issues.” Then a separate posting by a Larry M. of CA on the same date agreed with Mr Schmidt re-iterating that IndyMac “has been offering very bad customer service and has a shady core business philosophy.”

At least for these two, IndyMac’s seizure by federal regulators on July 12, 2008 was long overdue. However, it is frightening when one is forced to face the fact that IndyMac’s failure is the second-largest bank failure in U.S. history. This fear is what prompted a massive run on deposits that required regulators to shut its main branch three hours early sending panic and chills, similar to those that struck depositors in 1929, through its depositors.

Many depositors, too young to remember the great depression, may not have realized that this situation, however, was no where near as disastrous as the earlier one because in this instance depositors were still able to use their ATM and debit cards to access a portion of their funds. In addition due to each of their accounts being insured by the FDIC all accounts, up to $100,000 most depositors funds would be accessible by the following week.

So while for IndyMac depositors their funds were salvageable, it concerned this writer that the FDIC only has fund assets of $52 billion dollars and if too many banks failed at once there might not be enough funds available to cover all deposits.

This concern was echoed by others I have spoken to, most of who had meager savings as it is. In the case of my daughter she wondered about pulling her savings from the bank. My advice to her was not to do so because doing so would only make the situation worse. I also told her that if the FDIC failed in its duty to protect the funds in a failed bank it would mean that paper money would be useless and the only secure thing would be silver, gold, or possessions that people would consider valuable.

 If you are or were an IndyMac depositor and wish to obtain more information regarding your particular situation you may check out the  FDIC website at www.fdic.gov/bank/individual/failed/IndyMac.html or call toll-free (866) 806-5919. According to most news reports I have read there are about 90 other banks on the verge of failure but it is almost impossible to find out if your bank is on that list. I personally went into my bank and asked for a financial report if earnings for the first quarter. By reviewing this report I found my bank to be currently solvent. It was suggested by the manager that if people were concerned about their own banks that they should watch for excessively large interest rate offerings for new accounts or other incentives showing a desperation to attract new depositors. She also suggested that others so like I did and ask for a current financial report that will indicate if their bank is currently operating in the black.