And now a bank run

This is no surprise to me but Indymac Bank in California is experiencing a bank run.

IndyMac, a mortgage specialist with about $18 billion of deposits, said on Tuesday it faced "elevated" levels of withdrawals.

From Rueters

IndyMac reported $17.3 billion of its deposits were insured by the Federal Deposit Insurance Corp. The FDIC has $52.8 billion in its insurance fund to cover bank failures.

From Yahoo

Indymac (ticker symbol IMB) has been on my list of the doomed for a while now. Their 52 week trading range is a high of $30.77 to today's low of $0.34. They reported yesterday that they were unable to raise additional capital and would be firing half their employees. A letter from Sen. Schumer (D, NY) last week to regulators questioning adequacy of IMB's reserves was simply the final nail in the coffin. We're just waiting on the funeral with the part of the reverend being played by the FDIC.

One of the more interesting (and conspiratorial) thoughts I've heard in multiple places is that FDIC may have chosen to do "stealth seizures". Typically when FDIC siezes a bank they come in Friday evening at close of business and examiners begin looking at accounts to see what is covered and what isn't. The idea behind stealth seizures is to a) Not spook the market b) make it look like whoever assumes the accounts bought them from the failed institution c) make it look like the bank sold out or merged with another bank rather than being assumed by FDIC. Interesting theory and given the shenanigans going on in the world of finance right now it is plausible.

There are a couple of similar sized banks that are in much the same shape as IMB, and I expect a similar fate to befall them shortly. There are also a couple of large regionals I'm very worried about right now as well though I think that they may find a buyer eventually.I'll not name names at the moment because it may actually be illegal to say a specific bank is in danger of failing.





MOD EDIT:
UPDATE!!!

[edit on 11-7-2008 by DontTreadOnMe]

I can't believe more people have not noticed this. Have a star and flag on me. Good work!


respectfully

reluctantpawn

Soooo if 2 more banks of the same size go under, the fed won't have the funds to bail anyone else? Right?

Bismarksea, that is a concern, however FDIC only makes up the difference between insured account value and actual assetts on hand. To date this year failed banks have had deposit bases only in the millions I think. An Indymac failure would be several orders of magnitude greater than all the FDIC actions to date this year together. I know of three institutions roughly the same size as IMB, and one much larger that I am almost certain are in the same shape. I've seen the head of FDIC on TV recently and she very much reminds me of "Brownie" of Katrina fame. IMO the FDIC should move in quickly so that there is still some deposit base left.

Hi JW, Great post. These knuckle-heads have been in the for a while now. Much can be gleaned from their performance" here

If one needs more "financial education" they should seek it Here

Or even here

We, as a civilization, are headed for a decline. Fasten your seatbelts and store some food... or not......

California foreclosures

Florida Foreclosures

Welcome to the "brave new world" everyone!

Bring your silver and gold.

Edit for T&C circumvention by spiderj




[edit on 7/9/2008 by Spiderj]

And so it begins.
Actually this is the second or third bank run in the US isn't it? (if you count Bear Stearns and that internet based bank in California)

The FDIC has been in preparation mode since at least February: FDIC to Add Staff as Bank Failures Loom

Something else that is an ominous sign is the latest report by the BIS:

The Unsustainable Has Run Its Course

After a number of years of strong global growth, low inflation and stable financial markets, the situation deteriorated rapidly in the period under review. Most notable was the onset of turmoil in the US market for subprime mortgages, which rapidly affected many other financial markets and eventually called into question the adequacy of capital at a number of large US and European banks. At the same time, US growth slowed markedly, reflecting setbacks in the housing market, while global inflation rose significantly under the particular influence of higher commodity prices.

...the sudden deterioration in both financial and macroeconomic conditions looked more like a typical “bust” after a credit “boom”. Indeed, several factors seem to support this ...

The "period under review" is this past year 07/08 (to June 30/08).

The next 6-12 months are going to be very rough.
.

[edit on 7/8/2008 by Gools]

I've followed ML-implode for a while now. Remember couple of months ago when everyone said crisis over? Well apparently not.

In other news,Jamie Dimon chairman of JPMorgan gave some speech today where he was talking about short sellers and how they needed to be punished. If one had shorted Bear Sterns or Lehman Brothers after their CEOs made similar statements they would have made some serious bank. JP being what it is (a main member of NY FED) I'll pass on that action, but looks like financials are still whipping boys in the market.

What is most interesting to me about Indymac is timing of FDIC action, will they follow normal protocol and close the doors Friday, or will they step in mid-week? Also Indy had been paying the highest CD rate in the country recently. I'd say to look real close at the financial condition of any institution that is offering deposit interest noticeable higher than it's peers. They aren't paying those rates because they want too. They are paying those rates because they need the deposit base.

Gools, you are correct about those banks failing, but one was mainly an investment bank and the other some sort of weird net based thingy. Some things that distinguish this is the brick and mortar branch locations and the size of it's deposit base. Other than watching when the FDIC finally acts, another thing to take note of is what percentage of insured deposits FDIC ends up on the hook for. After that we may have a good idea of how much the FDIC is looking at paying out when the others go. I have no doubts that the FDIC would not be able to handle oh lets say a Washington Mutual or Wachovia failure.

Thornburg Mortgage TMA will be next. I think there are more shoes to fall. I feel this is eerily similar to what went down in the late 20s like I stated in a thread I just wrote. This is going to get much uglier before it gets better and it will lead to a 3rd WW and you can take that to the bank.

MBU, yeah that one's on my list as well. I don't really follow things once they fall below $5, IMB was a special case because my timing was off on a position I had earlier this year (early =wrong) and kept it on my watch list to remind me of one of my mistakes.Wow TMA at $0.19 a share. Are they regulated by FDIC or some other agency? I played that one a bit last year when it was one of the last of the mortgage lenders to nosedive into an empty pool. I know of at least 3 other banks/lenders that if people knew how bad they looked they would yank every penny out like yesterday.

A disturbing development to be sure. Thanks for bringing this out, I had no idea that this sort of thing was going on down there!

I will be following this one with interest!

A star pour vous!

They Fed is not going to let many of these banks fail. In the middle of the night they will just go in and exchange govt. bonds for the bad paper on the banks books. Then the banks will simply borrow operating funds from the open market, using the govt. bonds as collateral.

The small and medium sized banks will fall. These banks, who setup shop during the global economic boom over the last 12 years, have no idea how to operate in a recession. Heck, their business model isn't designed to cope.

Northern Rock and Bradford & Bingley are two banks in the United Kingdom caught up in this fiasco, Bank of England and the City of London are trying to prevent a run occuring with Bradford & Bingley.

Spanish banks are in a much worse position

Dear friends;

Three words: "Fractional Reserve Lending"

This is what it leads to - the Central Banks (the Fed) are supposed to 'support' Banks in these cases. Where are they now? Bear Stearns must have used up all the available bailout money.

Poor citizens, they thought there money was actually 'in the bank'!



((Edit to add background on "Fractional Reserve Banking"))

I must point out that the Wiki article is 'Banking" sanitized and tends to represent the truth in a less than factual manner; phrases such as;

The fact that banks are required to keep on hand only a fraction of the funds deposited with them is a function of the banking business.

Make it seem as if the funds exist elsewhere, when in actually the funds aren't kept on hand because they don't actually exist!

Also, the example posted there shows a fractional amount that is a laughable lie (20%), they fraction they are required to 'represent' is devoid of regulation and in some cases may not exist at all (5% - 0%)!



[edit on 9-7-2008 by Maxmars]

Originally posted by Maxmars
Dear friends;

Three words: "Fractional Reserve Lending"

This is what it leads to - the Central Banks (the Fed) are supposed to 'support' Banks in these cases. Where are they now? Bear Stearns must have used up all the available bailout money.

Poor citizens, they thought there money was actually 'in the bank'!

hehe max well put. I never understood this either. How is it all the medium and small banks are allowed to go under without as much as a wimper and the big banks get all the money and help they need. Once again it seems like this has happened before..hmm when has this happened before.

reply to post by jefwane


Yeah I used to play around with it also in 2006 but just happened to glance over last week and see its final death spiral into the "empty pool" as you like to put it. Im looking very strongly at citibank though. When the next big shoe drops Im in. Citi is one of our first banks founded in 1812. This bank will not be allowed to go under. if it hits $12 a share im in and riding it for 5 to 10 years if I have to. When all this cheap borrowed money starts flooding the market it could potentially be a $100 stock.

Originally posted by bismarcksea
Soooo if 2 more banks of the same size go under, the fed won't have the funds to bail anyone else? Right?

As I understand it, FDIC has reserves to cover 1.5% of the deposits it insures. It translates that, as best as I can figure, in a collapse about 98.5% of us would be screwed. If you are putting faith in FDIC, sharpen your nails and hold on tight. Make some room in your mattress and sleep on it.

Originally posted by romanmel

Originally posted by bismarcksea
Soooo if 2 more banks of the same size go under, the fed won't have the funds to bail anyone else? Right?

As I understand it, FDIC has reserves to cover 1.5% of the deposits it insures. It translates that, as best as I can figure, in a collapse about 98.5% of us would be screwed. If you are putting faith in FDIC, sharpen your nails and hold on tight. Make some room in your mattress and sleep on it.

Also, the payment contract allows for a 100-year period to pass before any repayments must be made - and more importantly - The FED can rescind the coverage altogether - it is in the Fed charter - they reserve the right to dissolve ANY debt!

has anyone researched just why INDY Bank is ?insolvent? bankrupt?,

from what i heard the Bank there in CA, (Palm Springs i think),
had an excessive ammount of construction and development loans made out to failing clients.
Normally the individual construction loans and monies loaned to Developers/developments are hughe money makers for those local banks,
but when the housing bubble and the credit crunch hit..it turned out to be a 'bedtime for bonzo' scene for Indy Bank.

whatever 'run' there is, it wouldn't surprise me if the bank went under because a paltry 100 depositers withdrew their $100k accounts,
(after all Palm Springs has its fair quota of retired millionaires)...
which leaves the other 1-2,000 estimated depositors having to wait over 6 months for the FDIC insured monies to be released.


of course the Fed 'window' is now open to banks such as this...
where the Fed Window was open only to the major 'primary lenders' just a few short months ago. Thus further inflating and debasing the fiat dollar at the same time.

Starred and flagged. I foresee an actual board topic featuring bank failures in the very near future.