IndyMac fails as 'problem' US banks multiply

July 14, 2008
IndyMac fails as 'problem' US banks multiply

THE collapse of IndyMac Bank, which could add up to be the most
expensive bank failure ever in the United States, comes as the number
of 'problem' institutions is on the rise.

The Federal Deposit Insurance Corp (FDIC) disclosed last month that
it was closely watching 90 financial institutions on its 'problem
list', up from 76 in the first quarter of the year, CNN reported
yesterday.

The total assets of these institutions rose from US$22.2 billion to
US$26.3 billion (S$30.2 billion to S$35.8 billion), the FDIC said.

The number of troubled institutions monitored by the FDIC had grown
in each of the last six quarters, starting in the autumn of 2006,
when there were just 47 on the list, CNN said. The last time it
approached this level was in the autumn of 2004, when the number was
95.

The FDIC does not publish a list of troubled banks out of concern
that it could spur a bank run, which is what happened to IndyMac,
according to CNN.

The Office of Thrift Supervision, which oversaw IndyMac, criticised
US Senator Charles Schumer. It said a June 26 letter that he had
written to regulators questioning IndyMac's viability prompted the
run on the bank, during which customers withdrew more than US$1.3
billion, prompting a liquidity crisis.

IndyMac, which was closed last Friday by US federal regulators, will
re-open today with a new charter and a new name - IndyMac Federal
Bank.

But analysts feared thousands of IndyMac customers could lose as much
as US$500 million, CNN said.

Customers who found locked doors and armed guards last Friday
afternoon could use ATM cards over the weekend to get to their money.
An estimated 5 per cent of the US$19 billion deposited in the bank,
however, was not insured, CNN said.