Late yesterday, the Federal Deposit Insurance Corporation (FDIC) and the Office of Thrift Supervision (OTS) “took control of Pasadena-based IndyMac Bank on Friday in what regulators called the second-largest bank failure in U.S. history.” The bank has succumbed to “huge losses from defaulted mortgages made at the height of the housing boom”:
Federal authorities estimated that the takeover of IndyMac, which had $32 billion in assets, would cost the FDIC $4 billion to $8 billion. Regulators said deposits of up to $100,000 were safe and insured by the FDIC.[…]
As the bank was shuttering offices and laying off employees nervous … depositors were pulling out $100 million a day. The bank’s stock price had plummeted to less than $1 as analysts predicted the company’s imminent demise.
The takeover of IndyMac came amid rampant speculation that the federal government would also have to take over lenders Fannie Mae and Freddie Mac, which together stand behind almost half of the nation’s mortgage debt.
Indymac’s website has been replaced with a terse notice from the FDIC informing the bank’s customers.
Over at the Wonk Room, Jared Bernstein argues that the potential meltdown of the home mortgage bank industry highlights the economic ignorance of Phil Gramm.