On a similar note, this should be a reminder to people to make sure to stay under the FDIC insurance limit of $100k (if your lucky enough to have that much in the bank).  There will undoubtadly be many other regional banks to follow Indymac down over the next year or two, including some larger the Indymac.

Matt, your're right about keeping funds spread out over several institutions.  The financial news is getting freakin' scary, even to me - not easily scared!

Reading through the report it looks like the FDIC is estimating it will cost them $4-8B dollars when this is all over, which represents 7-14% of their total $56B balance sheet.

IndyMac also owes the FHLB (Federal Home Loan Bank) about $10B, that's gonna leave a mark.

4-8 Billion?  Wow, that's a huge hit.  This won't be the only one like this unfortunately.

I love how the OTS (Office of Thrift Supervision) is publically blaming Schumers letter for the closing of IndyMac.

"The immediate cause of the closing was a deposit run that began and continued after the public release of a June 26 letter to the OTS and the FDIC from Senator Charles Schumer of New York [that] ... expressed concerns about IndyMac's viability," the agency said.

What a bunch of idiots.  The FDIC has been asleep at the wheel for months which is what caused it to get so out of hand.  IndyMac was very clearly insolvent, the $4-8B in closing costs estimated by the FDIC is pretty good proof of that.  By not acting soon enough the FDIC just put more depositors at risk, as Indymac took on huge amounts of brokered accounts to try to dig themselves out of a very deep whole.  Yes, I think the regulators are causing MUCH bigger problems by sticking their heads in the sand and not dealing with the issues.

It is insane I also heard something is going on with Bank of america with the purchase of Countrywide

Now Schumer is firing back:

Sen. Charles Schumer on Friday blamed IndyMac Bancorp Inc's failure on its main regulator, the Office of Thrift Supervision, and said it should start doing its job.

"If OTS had done its job as regulator and not let IndyMac's poor and loose lending practices continue, we wouldn't be where we are today," said Schumer, a Democrat from New York. "OTS should start doing its job to prevent future IndyMacs.

I find is slightly disturbing when I actually agree with a Senator :)

Oh my.  Another one bites the dust...

Oh right away, I'll go pull all that money I have out. (tongue in cheek)

I would hate to be put in the position of agreeing with Chuck Shumer... 

I can see how the ones that NEED the money the most are the ones that are doing everything they can to get some cash in.  Luckily(?) I'm not really having to worry about the $100k limits...

Interesting connection with interest rates, never thought of that, but that seems logical and correct.

Mat, I heard both WAMU and Wachovia are looking for suitors too.  And, Wachovia has one of the highest CD rates at the moment. AJ

Yes, WAMU and Wachovia are two of the largest regional banks that I've been following closely for over a year now I believe have a very high probability of failing.  They both have tens of billions of losses in their ALT-A and HELOC portfolios which they've yet to realize.

WAMU's in a particularly bad position because their access to raising additional capital is gone due to ratchet clauses in their last round of funding.  Even by their own CFO's admission they may have close to $30B in unrealized losses in their loan portfolio and lots of independant analysis I've seen puts the number higher.  Almost all of the profits they've been booking the last year and a half have been from negative amoritization (why this is allowed is insane), some of their accounting might make Enron's accountant's blush.  I think if an aquisition was going to happen it would have happened by now, it's just a matter of time before they follow the IndyMac route, or something similar.

Wachovia's another interesting one, they have a massive portfolio of option ARM's, which are pretty much the worst of the worst.  I think the total portfolio size is $140B, with over $70B of these in California.  Just take a look at the defaults in Downey Financial's option ARM portfolio to get an idea of the problem here.  The writedowns on this portfolio and loan loss reserves they've set aside are miniscule against even the defaults that are already ocurring, even without considering the future ones.  They're probably not in as bad of a near term position as Wamu though.

Now here's the real problem is Wamu alone has $320B, in assets, 10X that of IndyMac.  Them going down could potentially wipe out most of the FDIC funds.  The FDIC would end up being recapitalized by Congress (no chance congress wouldn't step in here) so the tax payer ends up footing the bill in the end.

I'm not sure if the Senator wasn't just grandstanding but the truth is, if you have a house of cards then a run on your bank is not going to end well.

Thanks for the lesson Matt about WAMY & Wachovia.  I knew IndyMac was in trouble at least 18 months ago from the things I was hearing, but didn't realize these others were in such trouble.  I agree, congress will be forced to step in, just the the '80's revisited!  Different cause, same result!

This is a sign of the times we are in...............