After fending off rumors of its impending demise for weeks, IndyMac Bancorp Inc., the troubled Pasadena-based thrift, was closed Friday by federal regulators.
The Office of Thrift Supervision transferred control of the company to the Federal Deposit Insurance Corp. The FDIC said it will transfer insured deposits and assets of IndyMac Bank to a new federally operated institution called IndyMac Federal Bank that will open Monday.
The bank failure is the second largest in U.S. history behind Continental Illinois Bank in 1984.
Regulators said that customers of IndyMac will have uninterrupted access to their accounts beginning next week at the bank's 33 branches.
New York Sen. Charles Schumer is being faulted for causing the bank's collapse after writing a letter June 26 expressing concern over IndyMac's financial health.
The OTS said in a written statement that "the immediate cause of the closing was a deposit run that began and continued" after Schumer's letter was made public. According to the office, more than $1.3 billion in deposits were withdrawn following Schumer's letter.
"Although this institution was already in distress, I am troubled by any interference in the regulatory process," said John Reich, director of the OTS, in the statement.
IndyMac specialized in so-called "Alt-A" loans for customers who do not provide full documentation of assets or income. But amid rising foreclosures as a result of bad loans, the company, along with Countrywide Financial Corp., has become a symbol of the mortgage meltdown.
IndyMac had about $32 billion in assets and total deposits of $19 billion as of March 31. Customers are insured 100 percent for deposits up to $100,000. The FDIC said the bank has about $1 billion of "potentially uninsured deposits" held by 10,000 depositors.
The FDIC said it will begin contacting uninsured customers on July 14. The agency said it plans to give customers with more than $100,000 at least 50 percent of their uninsured deposit amounts.
Wade Francis, president of Long Beach-based Unicon Financial Services, said there is "very little" chance that uninsured depositors will get all their money back because IndyMac had a large number of home loans, which will be difficult to sell off.
"The only hope of getting a higher amount of money back is if real estate prices went up and I really don't see that happening anytime soon," he said.
Francis also said that by transferring assets to a federal bank, it is likely that regulators could not find a buyer and that they will begin selling off the bank's assets, including its 33 branches throughout Southern California.
Earlier this week, the company said it had fallen below the level of "well-capitalized" and was struggling to raise new capital. As a result, the company announced plans to lay off more than half of its staff and stop accepting new loan applications.
This is California's first FDIC-insured failure since Torrance-based Southern Pacific Bank went under in 2003.
IndyMac declined to comment.
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