Faced with a sudden and serious liquidity crisis, IndyMac Bank borrowed nearly $1 billion from the Federal Reserve in the days leading up to its July 2008 failure, according to documents released Thursday by the central bank.
The borrowings, first reported by the Wall Street Journal, included a $500 million loan on July 11, the day the Pasadena savings and loan was seized by federal regulators.
The revelation was part of a massive disclosure of information on the banks that used the Fed’s discount window emergency loan program during the financial crisis. The longtime program allows financial institutions to take out short-term loans to address unexpected liquidity challenges.
Amid opposition from major banks, the Supreme Court ordered the Fed to release information on the program for the first time ever following lawsuits brought by Bloomberg News and Fox Business Network.
According to the documents, Washington Mutual was a major borrower during the period, taking out billions in loans just before it was seized and sold to JPMorgan Chase & Co. in September 2008. Some of the heaviest borrowers were foreign banks, including Belgium’s Dexia SA, which took $31.5 billion in October of that year.
With losses piling up in early 2008, IndyMac faced a billion-dollar run on deposits. The critical situation forced management to turn to the Fed beginning July 8 for four separate loans, including a $450 million payment prior to the $500 million on July 11. The amounts of the two remaining loans were not immediately available.