IndyMac Shut Down by Regulators; FDIC to Take Over
IndyMac Bancorp has been shut down and its operations will be taken over by the Federal Deposit Insurance Corp., the regulator that oversees the retail bank said.
The Office of Thrift Supervision (OTS) said it shuttered the $32 billion bank, headquartered in Pasadena, Calif., on Friday. A successor institution, IndyMac Federal Bank, will open for business on Monday.
IndyMac becomes the biggest retail bank to fall victim to the U.S. mortgage crisis.
IndyMac, one of the country's biggest mortgage lenders, said earlier this week that it was laying off half its staff and would halt mortgage-origination activity.
"The OTS has determined that [IndyMac] ... is unlikely to be able to meet continued depositors' demands in the normal course of business and is therefore in an unsafe and unsound condition," the OTS said in a statement.
"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 [that] ... expressed concerns about IndyMac's viability," the agency said.
In the 11 business days following Schumer's letter, depositors withdrew more than $1.3 billion from their accounts, the OTS said.
Schumer on Friday blamed the OTS and IndyMac itself for the bank's closing.
"IndyMac’s troubles, just like Countrywide’s, were caused by practices that began and persisted over the last several years, not by anything that happened in the last few days," the senator said in a statement. "If OTS had done its job as regulator and not let IndyMac’s poor and loose lending practices continue, we wouldn’t be where we are today. Instead of pointing false fingers of blame, OTS should start doing its job to prevent future IndyMacs."
Shares of IndyMac last closed at 28 cents, down 9.68 percent. The stock's year-to-date high of $11.32 was reached on Feb. 4.