CA’s IndyMac Collapses
California-based IndyMac Bank has collapsed amid a growing credit crisis. Federal regulators seized the bank's assets, fearing it might not be able to meet withdrawals by depositors.
It is the second-largest financial institution to fail in US history, regulators say.
The failure came on a day when shares in the two biggest US home loan institutions - Freddie Mac and Fannie Mae - fell at one stage by almost 50%.
IndyMac had been struggling to raise funds and stay in business in one of the states worst hit by the US housing market slump.
The bank's primary regulator, the Office of Thrift Supervision (OTS), said depositors had withdrawn more than $1.3bn in the past 11 days.
"This institution failed today due to a liquidity crisis," OTS Director John Reich said.
The OTS believed IndyMac was unlikely to meet its depositors' demands and transferred its operations to the Federal Deposit Insurance Corporation (FDIC), which will seek a buyer.
People with deposits of up to $100,000 each are covered by insurers.
But about 10,000 people had uninsured funds over that limit with IndyMac - worth a total $1bn at the time of closing.
The FDIC said it would pay those people an advance dividend equal to half of their uninsured deposit.
It is the fifth US financial institution this year to succumb amid a credit crunch, falling house prices and rising foreclosures.
The move came after roller-coaster trading on Friday for Freddie Mac and Fannie Mae - which are behind half of all US mortgages.
Published on July 14, 2008
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