NationStates Jolt Archive

I couldn't find a thread for this, so...

By John Poirier and Rachelle Younglai

WASHINGTON (Reuters) - U.S. banking regulators swooped in to seize mortgage lender IndyMac Bancorp Inc on Friday after withdrawals by panicked depositors led to the third-largest banking failure in U.S. history.

California-based IndyMac, which specialized in a type of mortgage that often required minimal documents from borrowers, became the fifth U.S. bank to fail this year as a housing bust and credit crunch strain financial institutions.

The federal takeover of IndyMac capped a tumultuous day for U.S. markets that saw stocks slide on a surging oil price and renewed fears about the stability of the top two home financing providers, Fannie Mae and Freddie Mac.

IndyMac will reopen fully on Monday as IndyMac Federal Bank under Federal Deposit Insurance Corp supervision, but tensions ran high as customers at a branch at its Los Angeles-area headquarters read a notice in the window saying it was closed.

At another branch down the road, a man who said he had more than $200,000 (100,000 pounds) in an account -- twice what is normally FDIC guaranteed -- argued with a security guard who was closing up.

The FDIC, which will seek a buyer for IndyMac, estimated the cost of the bank's failure to its $53 billion insurance fund at between $4 billion and $8 billion.

"IndyMac is a company that was pretty much 100 percent invested in mortgage assets, and we're in a bad mortgage market, and it had no capital. It's not complicated," said Adam Compton, co-head of global financial stock research at RCM in San Francisco, which manages about $150 billion.

IndyMac joins top bank failures headed by the 1984 collapse of Continental Illinois National Bank & Trust Co.

The Office of Thrift Supervision (OTS) insisted IndyMac's failure was the second-largest bank failure based on FDIC figures. But the FDIC said its data showed it was third behind the collapse of First RepublicBank Corp in 1988.

RUN ON THE BANK

The OTS, IndyMac's primary regulator, blamed comments by New York Democratic Sen. Charles Schumer for causing a run on deposits at the largest independent publicly traded U.S. mortgage lender.

Schumer responded quickly on Friday, blaming the OTS for not doing its job and allowing IndyMac's loose lending practices. "OTS should start doing its job to prevent future IndyMacs," he said in a statement.

Schumer questioned IndyMac's ability to survive the housing crisis in late June, and over the next 11 business days, depositors withdrew more than $1.3 billion, the OTS said.

"This institution failed today due to a liquidity crisis," OTS Director John Reich said. "Although this institution was already in distress, I am troubled by any interference in the regulatory process."

IndyMac was founded in 1985 by David Loeb and Angelo Mozilo, who also founded Countrywide, another big mortgage lender whose loans helped fuel the housing boom. Countrywide was taken over last week by Bank of America Corp.

FDIC spokesman David Barr said agency officials arrived at IndyMac's headquarters in Pasadena at 3 p.m. (2200 GMT).

The successor FDIC-run bank opens for business on Monday. Over the weekend, depositors will have access to their funds by ATM, other debit card transactions, or by writing checks, but no access via online banking and phone services until Monday.
Only the first half of the article

Honestly, this is shocking, to me. Though Gramm's comments about Americans being whiners, doesn't seem to be so founded after seeing this, or maybe I'm not seeing it right :rolleyes:

A buisness fails. Whoop-de doo. The only news-worthy part of this is that the government swooped in and now runs it.
*Sigh* All hail Big Brother.

*Sigh* All hail Big Brother.

Oh please

Oh please

The natural progress of things is for liberty to yield and government to gain ground.
^

A buisness fails. Whoop-de doo. The only news-worthy part of this is that the government swooped in and now runs it.
*Sigh* All hail Big Brother.


As oppossed to letting it collapse and having people lose their life savings in the process. O what bastards they are.

As oppossed to letting it collapse and having people lose their life savings in the process. O what bastards they are.

Thats what the FDIC is for.

I couldn't find a thread for this, so...

Only the first half of the article

Honestly, this is shocking, to me. Though Gramm's comments about Americans being whiners, doesn't seem to be so founded after seeing this, or maybe I'm not seeing it right :rolleyes:

not really. the banking collapse in 84' came at perhaps one of the strongest runs the US economy had since the 50's. so banking collapse is not in of itself a indicator of issues. now the inflation unemployment and other shit going on are.

1. Everyone has known that this was on the cards for months now.

2. This is small potatoes. Just wait until Wamu or WB go under.

What Conserative Morality fails to understand is that the collapse of a bank has serious social repercussions if left unchecked. People's bank accounts are at stake, after all. In order to avoid uprisings and the like, the government intervenes in these situations. Some free market fundamentalists may grumble, but it certainly beats large scale rioting and civil war.

And Thomas Jefferson was not really an advocate of liberty, given the fact that he had no qualms about owning slaves. Oh well, it's allowed according to the Bible.

I'm just glad it's happening in America. If this was, say, UBS in Switzerland, the government would have a much harder time simply stepping in.

http://media.economist.com/images/20080705/CBB561.gif

I'm just glad it's happening in America. If this was, say, UBS in Switzerland, the government would have a much harder time simply stepping in.


UBS is not without its own problems. And though I doubt it will actually fail I do expect some type of major government intervention at some point in the future.

And of course all of this is a mere bag of shells compared to the whole fannie/freddie dealio.

Jefferson quotation
Oh man, that's hilarious: quoting Thomas Jefferson in support of the banking industry? The man hated financiers, and thought banking establishments were "more dangerous than standing armies".

What Conserative Morality fails to understand is that the collapse of a bank has serious social repercussions if left unchecked. People's bank accounts are at stake, after all. In order to avoid uprisings and the like, the government intervenes in these situations.

Oh yes, because people riot over everything, don't they? Peoples entire life savings are at stake at the stock market, should the government take that over too? This is just another excuse for the government to get a little more control.
Some free market fundamentalists may grumble, but it certainly beats large scale rioting and civil war.
I'm pretty sure there was never a civil war over a bank going under.
And Thomas Jefferson was not really an advocate of liberty, given the fact that he had no qualms about owning slaves. Oh well, it's allowed according to the Bible.
Completely ignoring the fact that slavery was allowed according to Paul, who, in case you didn't know, was NOT Jesus. Also ignoring that Thomas Jefferson said Paul was:
first corrupter of the doctrines of Jesus
Also ignoring that, back then, Africans weren't viewed as fully human. We know better now, but the slave issue was for Thomas Jefferson, purely one of ignorance.

Oh man, that's hilarious: quoting Thomas Jefferson in support of the banking industry? The man hated financiers, and thought banking establishments were "more dangerous than standing armies".
Back then, they printed their own money. The danger was to the very fabric of the country. If you have a thousand banks printing a thousand different notes, something screwy is going to happen. Besides, it's not in defense of the banking industry, but rather in support of the free market. If I was defending the bank itself, I'd say the government should support it then back away. I'm saying that they should let the bank go under, let it fail, let the free market run.

Oh man, that's hilarious: quoting Thomas Jefferson in support of the banking industry? The man hated financiers, and thought banking establishments were "more dangerous than standing armies".

He was quite right. In fact, that's why Switzerland was our mortal enemy during WWII; compared to it, Nazi Germany was simply a gadfly. :rolleyes:

Weak businesses, including poorly-managed banks, will often fail; indeed, this is an integral aspect of a competitive free market. Following such failures, only more efficient institutions will remain; moreover, those who had the foresight to not invest their money in substandard banks will emerge with their wealth intact. However, once the government interferes with the smooth functioning of this system, we must all suffer for the idiocy of the few, not to mention the fact that recklessness is encouraged. The government is clearly the major culprit in this so-called "crisis"; even in this instance, it was inappropriate governmental action that precipitated the problems faced by the bank.

All the more reason to suggest, then, that contextless Jeffersonian soundbites have about zero bearing on the topic at hand.

Peoples entire life savings are at stake at the stock market, should the government take that over too? This is just another excuse for the government to get a little more control.

A few well-written laws should do the trick, it's not like governments need to own institutions in order to control them. And let's face it: democratic governments have been given power by the people. And there's no power without CONTROL.

A few well-written laws should do the trick, it's not like governments need to own institutions in order to control them. And let's face it: democratic governments have been given power by the people. And there's no power without CONTROL.
But where's the line? Where do you stop the Governments control area? What does the government need to control?

My answer:
The government needs to control itself, and control the police/military.

Besides, what are the laws supposed to say? "You, as a bank, hereby may not go out of business." I pretty sure that they DIDN'T want to go under either. There are no laws that can be created by the government that can both control Businesses, and not own them. The government is best described by Aleksandr Solzhenitsyn's explanation of the stomach:


The belly is a demon, no matter how much you give it today, it will still want more tommorow.
The problem is, instead of giving our government the same amount as yesterday (As we do with our stomach's...For the most part), we give them more and more, fueling it's hunger.

All the more reason to suggest, then, that contextless Jeffersonian soundbites have about zero bearing on the topic at hand.
*Sigh* Contextless? The only quote here that has been contextless is yours about Jefferson's position on the bank. Unless of course, the USA is no longer talking about liberty being part of this country, in which case I'm moving.

Back then, they printed their own money.
...

...
Generally, a central bank or treasury is solely responsible within a state or currency union for the issue of banknotes. However, this is not always the case, and historically the paper currency of countries was often handled entirely by private banks
... (http://en.wikipedia.org/wiki/Paper_money#History)

I'm saying that popping out something you found off Wikiquote and singing praise to the free market doesn't seem an appropriate response to one of the largest bank failures in US history. This isn't the Soviet Union. The US government has not one characteristic in one hundred with the Eurasian government (despite what partisans of both sides say) Perhaps, instead of doling out cliches, you might care to comment on the Paulson plan for revision of the regulatory system? Or offer a critique of Bernanke's latest comments?

... (http://en.wikipedia.org/wiki/Paper_money#History)

If you had bothered to further read your own source, you'd learn that it was never the case in the United States.