IndyMac Bancorp Files for Chapter 7 Bankruptcy

NEW YORK, Aug. 1, 2008 (Reuters) — IndyMac Bancorp Inc , once one of the largest U.S. mortgage lenders, has filed for bankruptcy protection, less than three weeks after being seized by federal regulators following a bank run by depositors. IndyMac was the ninth-largest U.S. mortgage lender in 2007, according to the newsletter Inside Mortgage Finance. It collapsed after defaults mounted, and as tight capital markets caused losses on mortgages it couldn't sell. The seizure came after panicked customers withdrew more than $1.3 billion of deposits over 11 business days.

The filing, which was widely expected, does not affect the status of depositors in IndyMac Federal Bank FSB, the successor to IndyMac's former banking unit after it was taken over by the Federal Deposit Insurance Corp last month. Most deposits at IndyMac Federal Bank are insured up to $100,000. The bank also holds the former bank's mortgages and other loans on its balance sheet, an IndyMac federal spokesman said. The FDIC is trying to sell IndyMac's assets.
IndyMac Bancorp, the holding company, has between $50 million and $100 million of assets, between $100 million and $500 million of liabilities, and fewer than 50 creditors, according to the bankruptcy filing.

The collapse of IndyMac was the largest U.S. banking failure since the 1980s savings-and-loan crisis. Regulators said IndyMac ended March with about $32 billion of assets and about $19 billion of deposits, most of which were insured. IndyMac was the fifth of seven U.S. banking failures this year. The FDIC said IndyMac's failure will cost the regulator's $52.8 billion insurance fund about $4 billion to $8 billion.

RBC Capital Markets analyst Gerard Cassidy has said there could be 300 U.S. banking failures in the next three years.

Related Posts :

IndyMac Bancorp (IMB) Filling for Chapter 11 Bankruptcy

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The Citi Killer Strikes C, UBS, MER, BAC and WB

Meredith Whitney, who was an early critic of Citi (C) last fall before the financial sector felt the full brunt of the credit crunch, gave her outlooks on July 30 in CNBC interview. The Mortgage Lender Implode Meter Blog has summarized Meredith's outlook in the interview as presented below:

Whitney says (loosely transcribed):

• Fed knows there is no quick fix. Every time they open window they lose fire power for next crisis. There is not much capital out there that wants to rescue brokers.
• I keep saying we are less than 50% done with this crisis and are still there.
• All capital raised by banks so far ($450 billion) was only to plug holes and not to grow business.
• All banks "assets" marked at unrealistic levels
• Creditors have cut mortgages and credit lines to the areas with the worst house prices depreciation. That will hurt consumers even more.
• Corporate loan market will get hit soon as well.
• Maria was prodding to find out how quickly the stock prices going back to the highs. Pump Pump Pump! Whitney says: There is no way the bank stocks will return to the highs in next 3-years. No comment on 5-years out. (Whitney seemed frustrated with the question being so shallow)
• The brokers are not growing capital and diluting the share holder. They can’t grow earnings that way.
• Merrill raised tremendous amount of capital just to plug holes. They still have to shed asset and are not out of woods yet.
• Most every bank has to write down assets like Merrill and raise capital.
• Banks who got in bed with housing assets such as C, UBS, MER, BAC, WB will be in the market "soon to do another capital raise.
• Everyone was involved in mortgages. All of these banks are in trouble now.
• 25 institutions will have to raise capital in next two months.
• Banks will cut dividend’s. I don’t understand why banks raise capital and then still pay a dividend. It is not prudent for board members to keep paying when they are so capital restrained.
• Fannie Freddie in same situation as every other institution. All banks are betting on house price assumptions that are far too optimistic. No banks are close to Case-Shiller.
• Due to bank’s bath math, losses will apply to everyone across the board.
• In 2006-07 $2.5 trillion was securitized. Nobody can replace this mortgage money and housing prices will continue to suffer as a result.
• When Maria asked if Lehman will survive, she said "huh huh huh huh huh huh I don’t know."
• I am very opinionated on the short selling rule. If you want to have faith in the capital market there has to be two sides to every trade and people have to be able to hedge. Restricting free trade will have the opposite effect and endanger the markets.
• Jamie Dimon and Goldman are ‘pros’ and very cautious and aware of risks.

According to Bloomberg on July 15, Meredith Whitney also reduced Wachovia’s Earning Outlook. She said the earnings outlook for Wachovia Corp. has "dramatically diminished" and bank stocks will keep falling until asset prices "get real". Among the major banks Wachovia will face the "greatest reckoning" with reduced profit opportunities and surging credit costs.

Related Posts :

1. Deutsche Bank Profit Falls 64%, Less Than Analyst Estimates, on Writedowns
2. Writedowns of Largest Banks Reach $274bn
3. Wachovia Bank(WB) Needs to Raise $15 Billion in Capital
4. Merril Lynch(MER) Takes A New $5.7 bn Pre-tax Writedown

Please Note!
This is generally never true. Before buying or selling any stock you should do your own research and reach your own conclusion. See my Disclaimer on the bottom for more information.

You are welcome to republish this article, or any portion thereof.
Please, cite the actual/original source. I would be grateful if you could link back.