[lexicon]

U.S. Shuts Big Bank As Crisis Intensifies
By Damian Paletta and David Enrich

IndyMac Bank, a prolific mortgage specialist that helped fuel the housing boom, was seized Friday by federal regulators in one of the largest bank failures in U.S. history.

The Pasadena, Calif., thrift was one of the largest savings and loans in the country with about $32 billion in assets. It now joins an infamous list of collapsed banks, topped by Continental Illinois National Bank and Trust Co., which failed in 1984 with $40 billion of assets.

IndyMac specialized in Alt-A loans, a type of mortgage that can often be offered to borrowers who don't fully document their incomes or assets. ...

http://online.wsj.com/article/SB1215814 ... whats_news

[Cashmere]

Huge. On many levels.

Big, big warning sign.

Credit crisis over? Not on your life. Just getting going.

[roccman]

Only 5950 to go.

Got bunker?

[eastbay]

Wiping out 10% of FDIC's cash. Wow. One swing.


So, what happens when the remaining 90% is paid out, which should happen later this year. Then what? Will the government simply print money to pay account holders? Will a percentage be paid instead?


You can't simply allow people with bank accounts lose their money. If people thought that might happen bank accounts would quickly empty. And that would cause some nasty problems for everyone.

[jbrovont]

True. Even if people thought they would get 95% back, because of interest rates vs. inflation, it makes more sense to pull it out in that senario. If people lose confidence in the FDIC, it's a whole new bucket of crud on the slop pile.

Wiping out 10% of FDIC's cash. Wow. One swing.
Will a percentage be paid instead?

You can't simply allow people with bank accounts lose their money. If people thought that might happen bank accounts would quickly empty. And that would cause some nasty problems for everyone.

**Edit **

At least in the short term, this gives me some more street cred with my head-in-the-sand friends. I've been calling this since Monday and tonight I got a buch of "wtf how did you know that" e-mails and calls.

[lentilsmine]

Another article at http://money.cnn.com/2008/07/11/news/co ... ymac_fdic/

Here are some select tidbits:

According to the FDIC, IndyMac's failure will result in up to $500 million in lost deposits out of $1 billion in uninsured deposits held by 10,000 customers. The agency says the failure will cost the Deposit Insurance Fund between $4 billion and $8 billion, based on preliminary estimates.

"It's possible this will be the most costly bank failure in history, but it's too soon to say," FDIC Chairman Sheila Bair said in a conference call late Friday night. The failure "could also affect premiums paid by all banks for deposit insurance," she added. [...]

IndyMac, with assets of $32.01 billion and deposits of $19.06 billion, is the fifth bank to fail this year. Between 2005 and 2007, only three banks failed. In the past 15 years, the FDIC has taken over 127 banks with combined assets of $22 billion, according to FDIC records. [...]

The head of the FDIC is looking to hire 25 staffers to deal with an anticipated increase in failures, a move that would increase its staff by 11%. Among those it hopes to hire are recent retirees who worked through the S&L crisis.

...

Now combine this with the talk of the government nationalizing Freddie Mac AND Fannie Mae or at least involving the FDIC in their operations due to a severe need to raise capital NOW ........ well. I'll be upping my stockpile again this weekend.

[lentilsmine]

Oh, BTW:

http://money.cnn.com/news/newsfeeds/art ... a997fa.htm

Lehman Brothers Holdings Inc. shares continued to slide Friday, at one point falling more than 15 percent amid speculation the investment bank is struggling financially.

Lehman shares slid $1.83 or 10.6 percent, to $15.47 in late afternoon trading. Earlier in the session, shares hit a nine-year low of $13.29.

Shares had already declined more than 24 percent this week.

"There is concern and speculation that Freddie, Fannie and Lehman won't be around on Monday," said Phil Orlando, chief equity market strategist at Federated Investors, referring to problems at the nation's largest mortgage purchasers Freddie Mac and Fannie Mae, which both were rocked again Friday, along with Lehman, the fourth-largest investment bank in the U.S. [...]

[lorenzo]

So any right wing loonie explain this to me:

-if I start up my own business, invest my own cash in it, and I go bankrupt. Will the state give me money to save my a$$? Will it give me your money? Will it give me enough of your money so I can just continue my business as if nothing happened?

-and if not, then why does it bail out Northern Rock, Freddie Mac and Fannie Mae, to name but a few capitalists - private companies like all other private companies - who should have gone bankrupt.

-why are these losers more important than me?

-and why should I give bankrupt capitalists a single one of my hard earned greenbacks?

Capitalism is fake. It doesn't work. It's bankrupt. The system is one big scam.


So capitalists, neoliberal market fundamentalists, and other right wing ayatollahs, I want some answers to these questions. Now.

If you don't give them, I see no reason why I should give up my membership of the communist party.

[Cashmere]

Lorenzo - I have no answer for you, but I'll say that the last 70 years have been more about cheap energy exponential growth than anything else, so I don't yet equate capitalism with what is currently happening.

[eastbay]

So any right wing loonie explain this to me:

-if I start up my own business, invest my own cash in it, and I go bankrupt. Will the state give me money to save my a$$? Will it give me your money? Will it give me enough of your money so I can just continue my business as if nothing happened?

-and if not, then why does it bail out Northern Rock, Freddie Mac and Fannie Mae, to name but a few capitalists - private companies like all other private companies - who should have gone bankrupt.

-why are these losers more important than me?

-and why should I give bankrupt capitalists a single one of my hard earned greenbacks?

Capitalism is fake. It doesn't work. It's bankrupt. The system is one big scam.


So capitalists, neoliberal market fundamentalists, and other right wing ayatollahs, I want some answers to these questions. Now.

If you don't give them, I see no reason why I should give up my membership of the communist party.

Yeah!!! Me too. Tell us why! Or the little red card remains in my wallet.

[roccman]

If you don't give them, I see no reason why I should give up my membership of the communist party.

When the rules change - one is under no obligation to continue playing.

Mail your keys in.

Stop paying on your credit cards and student loans

Rent.

The pigmen could give a rats ass about you...the government gives a rats ass about you...the only one that may really care for you may be your mom, but I am not even sure that is the case for the majority.

Game over folks...

[Heineken]

Was this announced before or after the stock market closed? Anyone know? I can't tell from the WSJ article.

[seldom_seen]

So, what happens when the remaining 90% is paid out, which should happen later this year. Then what? Will the government simply print money to pay account holders? Will a percentage be paid instead?

That's a good question. I think it will unfold like this...

A stern looking Hank Paulson and Ben Bernanke will appear before the Senate to underline the importance of "capitalizing" the FDIC. Due to unforeseen economic events that "never could have been predicted." The government working with the fed must "step in" to "support the important role of the FDIC during this correction in the market." Thus an unlimited credit line will be extended to the FDIC backed by the good faith of the US government.

Got wheel barrels?

[joewp]

Was this announced before or after the stock market closed? Anyone know? I can't tell from the WSJ article.

Looking at Google News, it looks like the earliest article about them being taken over was filed at around 4 hours ago, or 7PM EDT.

So I would say this happened well after the market closed. Should call for fun times on Monday, especially if something bad happens to Fannie and Freddie over the weekend.

I'm so glad I have those puts on the Dow!

[jdmartin]

It was announced after market close. FDIC people starting passing out flyers to customers at about 3PM Pacific Time which would be 6PM EST. I know the news release wasn't out until I got home after 6.

This is some scary shit that's for sure.

[roccman]

So, what happens when the remaining 90% is paid out, which should happen later this year. Then what? Will the government simply print money to pay account holders? Will a percentage be paid instead?

That's a good question. I think it will unfold like this...

A stern looking Hank Paulson and Ben Bernanke will appear before the Senate to underline the importance of "capitalizing" the FDIC. Due to unforeseen economic events that "never could have been predicted." The government working with the fed must "step in" to "support the important role of the FDIC during this correction in the market." Thus an unlimited credit line will be extended to the FDIC backed by the good faith of the US government.

Got wheel barrels?

+1 !!

The front end of this year most people would not bring themselves to believing that our government was going to not only destroy the USD, but also the global economy.

Reality is a bitch.

Got Gold?

BTW - where are the gold shorts these days...maybe Tyler Knows...

[Daniel_Plainview]

So, what happens when the remaining 90% is paid out, which should happen later this year. Then what? Will the government simply print money to pay account holders? Will a percentage be paid instead?

That's a good question. I think it will unfold like this...

A stern looking Hank Paulson and Ben Bernanke will appear before the Senate to underline the importance of "capitalizing" the FDIC. Due to unforeseen economic events that "never could have been predicted." The government working with the fed must "step in" to "support the important role of the FDIC during this correction in the market." Thus an unlimited credit line will be extended to the FDIC backed by the good faith of the US government.

Got wheel barrels?

"... backed by the good faith of the US Government" .... now there's an oxymoron!

[hardtootell]

http://en.wikipedia.org/wiki/Image:Amer ... n_bank.gif

[Heineken]

So, what happens when the remaining 90% is paid out, which should happen later this year. Then what? Will the government simply print money to pay account holders? Will a percentage be paid instead?

That's a good question. I think it will unfold like this...

A stern looking Hank Paulson and Ben Bernanke will appear before the Senate to underline the importance of "capitalizing" the FDIC. Due to unforeseen economic events that "never could have been predicted." The government working with the fed must "step in" to "support the important role of the FDIC during this correction in the market." Thus an unlimited credit line will be extended to the FDIC backed by the good faith of the US government.

Got wheel barrels?

"... backed by the good faith of the US Government" .... now there's an oxymoron!

I believe the usual expression is "backed by the full faith and credit of the United States government."

Starting to sound even more ridiculous, isn't it?

[threadbear]

Was this announced before or after the stock market closed? Anyone know? I can't tell from the WSJ article.

I was reading up on the news at my favorite trader's site at about 1:30 Pacific Time. I think the Dow closes around that time. No mention of it. So yep, they waited till it was closed, is my guess. It just gives everyone a lot to chew on over the weekend.