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Regulators close U.S. bank!

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WinterHawk

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http://www.reportonbusiness.com/servlet/story/RTGAM.20080711.windymac0711/BNStory/Business/home

JOHN POIRIER AND RACHELLE YOUNGLAI

Reuters

July 11, 2008 at 8:23 PM EDT

WASHINGTON — U.S. banking regulators Friday swooped in to take over mortgage lender IndyMac Bancorp Inc, the second-largest bank failure in U.S. history and the fifth bank to close this year.

The Federal Deposit Insurance Corp estimated the cost of the California-based bank's failure to its $53-billion (U.S.) insurance fund at between $4-billion and $8-billion and will run the bank while it looks for a buyer.

The takeover of IndyMac capped a tumultuous day for U.S. financial markets that saw stocks slide on a surging oil price and renewed fears about the stability of the top two home financing providers, Fannie Mae and Freddie Mac.

IndyMac's primary regulator, the Office of Thrift Supervision, blamed comments by New York Democratic Senator Charles Schumer for causing a run on the deposits at the largest independent publicly traded U.S. mortgage lender.

Mr. Schumer responded quickly Friday, blaming the OTS for not doing its job and for letting IndyMac's loose lending practices continue.

The OTS said depositors have been withdrawing cash at an elevated pace since late June, when Mr. Schumer questioned IndyMac's ability to survive the housing crisis.

In the following 11 business days, depositors withdrew more than $1.3-billion from their accounts, the OTS said.

“This institution failed today due to a liquidity crisis,” OTS Director John Reich said. “Although this institution was already in distress, I am troubled by any interference in the regulatory process,” he said.

The successor bank run by the FDIC will open for business Monday. Over the weekend, depositors will have access to their funds by ATM, other debit card transactions, or by writing checks. They will have no access via online banking and phone services until Monday.

Earlier in the week, IndyMac said it was unable to raise new capital, would slash staff by 60 per cent and had stopped making home loans. Its stock slid precipitously in the past week and last traded at 28 cents on the New York Stock Exchange, down 95 per cent from the beginning of the year.

The FDIC insures up to $100,000 per deposit and up to $250,000 per retirement account at insured banks.

At the time of closing, IndyMac had about $1-billion of potentially uninsured deposits held by about 10,000 depositors. The FDIC said it would pay those depositors an advance dividend equal to 50 per cent of the uninsured amount.

OTS told a conference call with reporters that it did not expect significant market impact from IndyMac's closure as the firm is not a systemic institution and does not have numerous counterparties. Mr. Reich also said he did not expect a larger thrift to fail.

Former FDIC official Ann Graham said it was not unprecedented for the FDIC to start running a bank after it fails. “It happens when they need to move more swiftly with the closing than they can move with a potential sale,” said Ms. Graham, a law professor at Texas Tech University.

“They don't have to sell the institution over the weekend,” she said. “They have the time to shop around.”

Ms. Graham said the FDIC has the authority to operate an institution for two years but expected the agency will dispose of it much sooner than that.
 
Was in America and every house on the street was 4 sale. Still looking for a rich woman.

Gyaos.
 
Un un....I see a home in the paper with a real estate company--not no private owner. Said like.."good area of Detroit, handyman special, $21,500....thats it! I was temped to call and see what area they claim was "good" but didn't.

All of Detroit is a dump...well maybe some areas are better yeah for crime but you still have Detroit police, Detroit trash pick up, Detroit courts, and Detroit is well Detroit.

The downtown area isn't bad but for $300,000 or so, you can get much better. For $21,500 thou Detroit is about it.
Those are the places thou when you go to work or the store, the kid down the street breaks in to your home. :(
 
But joe, you have to admit though there are good areas and bad areas of every city.

I was in Chicago once and stopped at a gas bar/convenience store to see if there were any cheap motels around (south side) and he literally said to my buddy and I: what you doing here? I said: ummm looking for a place to stay, he said: you'd better leave quickly, there are some just south of here....

We didn't think anything of being the only two white faces as far as the eye could see but it was a rough looking area.....

As for house prices: I heard that (I think it was) bakersfield Ca. has a 85% vacancy rate on houses and the average is 1 occupied house per street. It was one of those areas that boomed with new developements until the banks started foreclosing. WHich is why I said: Why on earth would a bank put themselves into a position where they are repossessing so many houses THEY create a downfall in the market. That is literally cutting off the hand that feeds you......
 
mortgage lender..............




you boys are so predictable
 
When I was young and foolish, my broker convinced me to "invest" in some "high quality commercial second mortgages". Sir, there is no such thing on this Good Earth as "high quality second mortgages". If someone wants to borrow from you on a second mortgage RUN don't walk away. You do not want to meet anybody who needs a second mortgage.
 
Well the Fed is acting like a socialist government...and here the R's try to say the D's are socialist....Feddie and Fannie are getting up to 300 billion dollars if need to stay afloat....lets see what happens tomomrow...it be a great day or a very bad day in the market...any guess???
 
S.C. Joe said:
Well the Fed is acting like a socialist government..
Click to expand...

The Federal Reserve is suppose to be the lender of last resort. Paudits are saying that Freddie and Fannie probably won't need to borrow from the Fed but good to know that the lifeline is there just in case.
 
WhOiSyOuRdAdDy? said:
I am sure before this crisis is over, there will be a few more fail
Click to expand...

Well ...

Analysts Say More Banks Will Fail

http://finance.yahoo.com/banking-budgeting/article/105391/Analysts-Say-More-Banks-Will-Fail

As home prices continue to decline and loan defaults mount, federal regulators are bracing for dozens of American banks to fail over the next year.

But after a large mortgage lender in California collapsed late Friday, Wall Street analysts began posing two crucial questions: Just how many banks might falter? And, more urgently, which one could be next?

The nation’s banks are in far less danger than they were in the late 1980s and early 1990s, when more than 1,000 federally insured institutions went under during the savings-and-loan crisis. The debacle, the greatest collapse of American financial institutions since the Depression, prompted a government bailout that cost taxpayers about $125 billion.


But the troubles are growing so rapidly at some small and midsize banks that as many as 150 out of the 7,500 banks nationwide could fail over the next 12 to 18 months, analysts say. Other lenders are likely to shut branches or seek mergers.
Click to expand...
 
jwmorrice said:
On these matters, Jim Rogers is always fun to listen to: http://www.bloomberg.com/avp/avp.ht...//media2.bloomberg.com/cache/vIQvD7yNni2I.asf

jwm
Click to expand...

I'm afraid Jim's right. The US dollar has no future at this point. The Fed's just flooding the system with bailout money nowadays. Bad times are around the corner, unfortunately. And I'm afraid that this recession's going to be long and deep.

This could be the crisis that shake's the rest of the world's complacency about the value of the dollar to such a point that it begins its inevitable decline. Even the US can't import real stuff indefinitely and pay for it only with paper printed with pictures of her presidents.....I guess the Yanquis are choosing to go out with a whimper. :(
 
Yeah, because this has never happened before. Come on guys, look at the past. We could have 250 banks/institutions fail and we wouldn't come close to the S&L crisis we had. There were 1000's of failures then and we seemed to survive that, no? I'm all for being realistic and defensive and I do think it will get worse before it gets better, but every time we paint a picture of absolute devastation it is never even close to being that bad.
 
http://customwire.ap.org/dynamic/st...ME&TEMPLATE=DEFAULT&CTIME=2008-07-15-12-00-04



LOS ANGELES (AP) -- Police ordered angry customers lined up outside an IndyMac Bank branch to remain calm or face arrest Tuesday as they tried to pull their money on the second day of the failed institution's federal takeover.

At least three police squad cars showed up early Tuesday as tensions rose outside the San Fernando Valley branch of Pasadena-based IndyMac.

Deposits to $100,000 are fully insured by the FDIC.

Worried customers with deposits in excess of insured limits flooded IndyMac Bank branches on Monday, demanding to withdraw as much money as they could or get answers about the fate of their funds.

When it was clear some wouldn't get in before closing, FDIC employees apparently took down names and told them to return Tuesday.

Other customers began lining up at 1:30 a.m. Tuesday, and by dawn, tensions escalated because people on the list were getting priority.

By 8 a.m., about 50 people on the list waited in one line and many more waited in another. Five people were allowed in at a time.

Customers became infuriated, and police told them they could be arrested if they didn't remain calm.

Police stood by at some other branches around Southern California but there were no other reports of problems.

© 2008 The Associated Press.
 
Wow, things are getting grim!

jwm


SEC to Limit Short Sales of Fannie, Freddie, Brokers (Update3)
By Jesse Westbrook and David Scheer

July 15 (Bloomberg) -- The U.S. Securities and Exchange Commission will limit the ability of traders to bet on a drop in shares of brokerage firms, Freddie Mac and Fannie Mae as part of a crackdown on stock manipulation, the agency's chairman said.

Christopher Cox told the Senate Banking Committee that the agency will require traders to hold shares of the two mortgage buyers and the brokerages before they execute a short sale. The emergency order, to be in effect for 30 days, will bar the practice called naked short selling, in which traders avoid the financial cost of borrowing shares when betting they'll fall.

Cox said the SEC will draft rules ``to address these same issues across the entire market.''

Hedge-fund manager William Ackman, who oversees $6 billion at Pershing Square Capital Management, is among those betting shares of Fannie Mae and Freddie Mac will fall. There's no indication he is engaging in naked short selling, in which traders never borrow shares from their broker or deliver the stock to buyers.

The SEC is reluctant to curb short sales ``because it would require a major retooling of the plumbing of Wall Street,'' said James Angel, a finance professor at Georgetown University studying short sales. ``It's only when the big Wall Street firms are threatened that the SEC does something about it.''

Trading Abuses

The SEC is investigating whether trading abuses contributed to the collapse of Bear Stearns Cos. in March and the 80 percent drop in the market value of larger rival Lehman Brothers Holdings Inc. this year. Fannie Mae and Freddie Mac have each lost about 80 percent of their value amid speculation the mortgage-market crisis may push the firms into insolvency.

Short-sellers, who borrow shares betting that they'll decline, are spreading rumors about Lehman in an organized attempt to depress the stock, according to Richard Bove, bank analyst at Ladenburg Thalmann & Co. in Lutz, Florida.

``As with Bear Stearns, Lehman has been targeted by the fear-trade,'' said Fox-Pitt Kelton Cochran Caronia Waller analyst David Trone in a report yesterday. Lehman should go private so it can avoid the attacks by short-sellers, he said.

Freddie Mac, down as much as 34 percent today before Cox's comments, fell $1.85, or 26 percent, to $5.26 in New York Stock Exchange composite trading. Fannie Mae tumbled 27 percent.

More Costly

John Nester, an SEC spokesman, said the emergency order will ``require any person effecting a short sale in the listed securities to borrow the securities before the short sale is effected and deliver the securities on settlement date.''

The SEC's proposal will raise the cost of short-selling a stock, said Gregory DePetris, co-founder of Quadriserv Inc., a New York brokerage that specializes in securities lending. ``There will be greater demand for shares,'' he said. ``It will make the process a little less easy.''

In traditional short selling, traders borrow stock through a broker and hope to profit by selling shares at a higher price and later buying them back at lower prices to repay the loan.

Naked short selling isn't necessarily illegal, unless authorities can prove fraud, such as a scheme to manipulate stock prices.

``Short-sellers in general help price discovery and make the market more efficient,'' said Warren Chiang, a fund manager at Mellon Capital Management, which oversees about $200 billion. ``But naked shorting isn't fair.''

U.S. Senator Charles Schumer questioned whether the SEC should restore the so-called uptick rule, which barred traders from short-selling stocks when prices are falling. The rule, scrapped in June 2007, was implemented after the Great Depression to prevent raids on companies.

While the regulator is considering ``some other kind of price test'' to regulate short selling, it has no plans to reinstitute the uptick rule, Cox said. ``It was just very clear that that rule no longer mattered,'' he said.

To contact the reporters on this story: Jesse Westbrook in Washington at jwestbrook1@bloomberg.net; David Scheer in New York at dscheer@bloomberg.net.
Last Updated: July 15, 2008 17:16 EDT
 
jwmorrice said:
On these matters, Jim Rogers is always fun to listen to:
Click to expand...

That Jim Rogers is so smart. He made his $100MM (when $100MM was real money) and left the stock market casino for academics. Now he still has BOTH his mind and his money.
 
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