(RTTNews) - Pasadena, California-based IndyMac Bancorp Inc. (IMB: News, Chart, Quote ), the holding company for Indymac Bank FSB, was closed by the Office of Thrift Supervision or OTS after the company's failure to raise capital. The regulatory has named Federal Deposit Insurance Corp. or FDIC as the Conservator to the run the bank.
OTS specified that, according to FDIC data, IndyMac is the second largest financial institution to close in US history and the largest OTS-regulated thrift ever to fail. IndyMac, which had total assets of $32.01 billion and total deposits of $19.06 billion as of March 31, 2008, now joins the list of financial institutions of major collapse, including Continental Illinois National Bank and Trust Co., which became insolvent in May 1984, and American Savings & Loan Association in 1998.
IndyMac is specialized in making and selling so-called Alt-A mortgage loans to consumers, who though more credit worthy than subprime borrowers, usually doesn't have complete documentation of income or assets necessary to receive a prime-rate loan.
IndyMac, which was founded as Countrywide Mortgage Investment in 1985, and spun off by Countrywide as an independent company in 1997, came under fire recently when Senator Charles Schumer of New York commented that lax lending standards and deposits purchased from third parties left the bank on the edge of failure.
Making situation worse, issues about taking responsibility of the failure were in a debate. OTS criticized that the immediate cause of the closing of the bank was a deposit run that began and continued after the public release of a June 26 letter by the Senator. OTS noted that, following the release of that letter expressing concerns about the bank's viability, depositors withdrew more than $1.3 billion from their accounts in the following 11 business days. In response, Schumer on Friday said that, "OTS should start doing its job to prevent future IndyMacs "
Commenting on the situation, OTS Director John Reich said, "This institution failed today due to a liquidity crisis. Although this institution was already in distress, I am troubled by any interference in the regulatory process."
