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Carl F. Worden
True to form, and in cooperation with federal authorities, the federal takeover of Indy Mac Bank?s assets didn?t take place today until it could fall under the radar of the closing Stock Market. The feds are hoping the weekend ?grace period? will allow investors to get a grip on themselves so that this coming Monday won?t turn into a market bloodbath ? as tomorrow very might have.
Indy Mac is (was) a huge financial institution, even if you are not familiar with it, and its demise spells real trouble for other banks around the nation.
A few months ago I wrote that the Stock Market was entering the crash stage and a few people wrote to let me know that my head is not residing where it should. I strongly suspect those individuals lost a great deal of money by now. I wrote that the Mortgage Meltdown was not a normal and survivable downturn for this nation. Now Freddie Mac and Fannie Mae are revealed to be in such serious financial stress that the federal government (us taxpayers) will have to step in to keep them both from failing altogether, and they are such massive institutions with such massive losses that I doubt it can really be done.
The time has come, and it is now. If you have not found shelter in more stable foreign currencies like gold, the Euro or preferably the Brazilian Real with what remains of your liquidity, you don?t have very much time left to do it. If you delay much longer, you could wake up one morning very soon and find out your $100,000.00 nest egg sitting in a Money Market account is worth less than ten cents on the dollar in terms of purchasing power. Yes, turbo-inflation is virtually guaranteed to strike the U.S. economy, and by history, such an event usually occurs so fast most savers and investors have hardly had time to read about it before they are drowning in it. How much more proof do you need? Carl F. Worden HERE IS WHAT HAPPENS WHEN A BANK IS CLOSED BY GOVERNMENT REGULATORS http://www.fdic.gov/bank/individual/failed/IndyMac.html
LOS ANGELES - Indy Mac Bank's assets were seized by federal regulators on Friday after the mortgage lender succumbed to the pressures of tighter credit, tumbling home prices and rising foreclosures. The bank is the largest regulated thrift to fail and the second largest financial institution to close in U.S. history, regulators said. The Office of Thrift Supervision said it transferred Indy Mac's operations to the Federal Deposit Insurance Corporation because it did not think the lender could meet its depositors' demands. Indy Mac customers with funds in the bank were limited to taking out money via automated teller machines over the weekend, debit card transactions or checks, regulators said. Other bank services, such as online banking and phone banking were scheduled to be made available on Monday. "This institution failed today due to a liquidity crisis," OTS Director John Reich said. The lender's failure came the same day that financial markets plunged when investors tried to gauge whether the government would have to save mortgage giants Fannie Mae and Freddie Mac. /**/ Shares of Fannie and Freddie dropped to 17-year lows before the stocks recovered somewhat. Wall Street is growing more convinced that the government will have to bail out the country's biggest mortgage financiers, whose failure could deal a tremendous blow to the already staggering economy. The FDIC estimated that its takeover of Indy Mac would cost between $4 billion and $8 billion. Pasadena, Calif.-based Indy Mac Bancorp Inc., the holding company for Indy Mac Bank, has been struggling to raise capital as the housing slump deepens. Indy Mac had $32.01 billion in assets as of March 31. A spokesman for the lender referred media queries to the FDIC. The banking regulator said it closed Indy Mac after customers began a run on the lender following the June 26 release of a letter by Sen. Charles Schumer, D-N.Y., urging several bank regulatory agencies that they take steps to prevent Indy Mac?s collapse. In the 11 days that followed the letter's release, depositors took out more than $1.3 billion, regulators said. In a statement Friday, Schumer said Indy Mac?s failure was due to long-standing practices by the bank, not recent events. "If OTS had done its job as regulator and not let Indy Mac?s poor and loose lending practices continue, we wouldn't be where we are today," Schumer said. "Instead of pointing false fingers of blame, OTS should start doing its job to prevent future Indy Macs." The FDIC planned to reopen the bank on Monday as Indy Mac Federal Bank, FSB. Deposits are insured up to $100,000 per depositor. As of March 31, Indy Mac had total deposits of $19.06 billion. Some 10,000 depositors had funds in excess of the insured limit, for a total of $1 billion in potentially uninsured funds, the FDIC said. Customers with uninsured deposits could begin making appointments to file a claim with the FDIC on Monday. The agency said it would pay unsecured depositors an advance dividend equal to half of the uninsured amount. During a conference call with reporters, FDIC Chairman Sheila C. Bair said the agency would cover all insured deposits and then try to recover its costs by selling Indy Mac?s assets. "We anticipate trying to market the institution as a whole bank," Bair said. "How much money we derive from that will depend on who gets paid what." Holders of unsecured Indy Mac debt may not fully recover their investment, Bair said. "Generally if a creditor is secured, they are at the top of the claims priority," she said. "If they are unsecured, they're pretty low on the claims priority and probably will take some type of haircut with this, but we have not had a chance to do a thorough analysis to know ... how extensive those losses will be." Indy Mac spent the last two weeks trying to reassure customers that it was not near default. On Monday, Indy Mac announced it had stopped accepting new loan submissions and planned to slash 3,800 jobs, or more than half of its work force ? the largest employee cuts in company history. In the letter to shareholders, Indy Mac Chairman and Chief Executive Michael W. Perry said the drastic measures were made in conjunction with banking regulators to improve the company's financial footing and "meet our mutual goal of keeping Indy Mac safe and sound through this crisis period." The plan was supposed to generate roughly $5 billion to $10 billion per year of new loans backed by government-sponsored mortgage companies, Perry said at the time. But the run on its deposits ultimately short-circuited the strategy, prompting regulators action Friday. |
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