Why indymac bank failed

The FDIC said it would pay those depositors an advance dividend equal to 50 percent of the uninsured amount. Reich also said he did not expect a larger thrift to fail. Four small banks have already been closed this year and the FDIC is hiring more staff in preparation for more failures. The agency has boosted its list of troubled banks to 90 and has said an increasing number of banks face high exposure to deteriorating conditions in commercial real estate and construction lending.

Last year, just three banks failed. Graham said the FDIC has the authority to operate an institution for two years but expected the agency would dispose of it much sooner than that. Business News Updated. Jagdish Belgaum rushed to the bank after hearing the news, only to be locked out. IndyMac announced Monday that it was laying off 3, employees.

But a handful of employees who were leaving the building appeared to be preparing for the worst, lugging boxes of belongings and saying goodbye to one another. One woman carried out a potted plant. Regulators said they hoped to sell the bank within 90 days. The FDIC has set up a toll-free phone line -- -- and a page on its website -- www. It was unclear what would happen to the holding company in light of the seizure.

All Sections. About Us. B2B Publishing. Business Visionaries. Hot Property. As home prices started to fall in , some subprime lenders filed for bankruptcy. In March , Wall Street firm Bear Stearns essentially failed because of its bet on the riskier mortgages, and it was sold at rock-bottom prices. Even Fannie and Freddie were losing money. She thought that was months away. But when some members of Congress raised questions about the bank's future, it sparked a rush by the bank's larger customers to withdraw their money, causing a cash crunch that sped IndyMac's demise.

She said so many loans had been made with questionable loan standards that the bank's failure had become inevitable. The one major regret Bair said she has about the IndyMac failure was that the FDIC closed the bank early on the afternoon of July 11 because it wanted to notify members of Congress of the action before it got too late on the East Coast.

That only fed the panic among IndyMac customers. But people were confused and scared," she said. From then on we never did that again.

Bair said there was plenty of blame "across the board" for the problems that arose in the financial system. But everyone was making money and the banks lobbied against standards. The rating agencies handing out good ratings on securities backed by the loans — shame on them. She said she is concerned about more recent moves to undo regulations put in place after the crisis, including the Dodd-Frank financial reform law.