July 15, 2008 Update – you can also read what happened to me yesterday … the Monday after the failure of IndyMac Bank here: The Monday After My Bank, IndyMac, Failed
To those that say the worst is over with respect to economic hard times, I have this question for you: why did my bank just FAIL on Friday?
I am a current customer of what was until last Friday IndyMac Bank, F.S.B. Prior to Thursday, I had close to $100,000 on deposit there – IndyMac Bank was paying 4.01% on their FDIC-insured e-Money Market accounts … and it seemed like a fairly safe place to stash some cash. I’m glad that I have religiously stuck to a strategy of keeping less than $100,000 in any single bank account – for reasons I’ll explain shortly.
So recently there has been a lot of negative press on IndyMac bank. I read several online articles about IndyMac that got me thinking about how safe that bank really was, such as:
Last Monday, July 7, I decided that my balance was too close to the FDIC-insured limit of $100,000 – and that I needed to transfer out some cash so that any upcoming interest payments would not take it over that insured limit amount. I visited the IndyMac website, and found that I could not setup an electronic link to my BofA checking account. RATS. Then I dug into the details of my account there, and realized that my e-Money Market account does not have check-writing privileges – RATS AGAIN. I called the 800 customer service line for IndyMac bank, and I sat on hold for forty-five minutes before I finally hung up – RATS YET AGAIN. Now I’m starting to think this isn’t looking too good. So I hit the Indymac.com website, and find the phone numbers of several regional branch offices. I called the Irvine branch, and someone actually answered – YES!!!! She told me that I have to physically come into the bank in order to make any sort of withdrawal. Well that is fairly inconvenient for me – but I realize that I will coincidentally be in Irvine on Thursday, and that I can perform an in-person transaction at that time. FINE.
Thursday afternoon, July 10th, I headed over to IndyMac bank’s Irvine office. I’m halfway expecting to find a line of customers stretching out the door … but no. The whole place is empty. There are three bank employees there when I arrive, and only one other customer. The bulk of the bank is empty – lot’s of empty space … kind of creepy … and not exactly confidence-inspiring. It so happened that the employee who wound up waiting on me was the branch manager – whose name I won’t mention. I told her I wanted to withdraw about $1500, and told her the reason (to keep my balance reasonably below the $100K FDIC-insured limit). She told me that I had nothing to worry about – that banks never fail … not even in the worst of times. And that I didn’t need to move any money – but if I want to, then it is no problem. She seemed credible enough at that moment. I thought about asking her why only three employees were left in such a large bank – but decided that might be a bit rude of me, so I kept my mouth shut. I got my check for approximately $1500, and out the door I went (straight to BofA where I have my checking account … where I immediately deposited the check via a teller with instructions that I need the check to clear immediately). No problem.
Friday, July 11th rolled around. I worked the bulk of the day, and toward 5 p.m. I went online to read cnn.com to see what happened in the financial markets that day. First thing I see at the top of the business section is an article entitled “The Fall of IndyMac”:
JEEZ – I was just there yesterday, and the branch manager told me everything was fine! She was a lying sack of shit now, wasn’t she? Actually I don’t personally blame her for telling me what she did – I’m quite sure that was simply bank policy that she was echoing to me.
So what now – what about the remaining under-$100K amount that I have in my account at this failed bank? Well the IndyMac.com website says that the bank will re-open on Monday under a different name, and that all accounts with less than $100,000 will have full access to their funds immediately – which is good news for me.
What about for those people who had MORE THAN $100,000 in an IndyMac bank account? Well from what I can tell, it basically looks like they are fucked for at least some significant percentage of the amount over $100K they had on deposit. The website states that the FDIC will give them an “advance dividend” of 50% of their uninsured deposit, and that they have to fill out a “Receiver Certificate” so their claim can be reviewed by an FDIC Claim Agent. Just for kicks, I scoured the internet to see what the rest of the process might be for those with more than $100K, and what I found was that those individuals become top-tier creditors of the bank – and will be paid before any other non-depositor creditors are paid … but that they won’t likely get 100% of their money back. They will probably get between 0% to 50% of the remaining 50% of the amount over $100K. That is quite a loss that many people will be subjected to – and I’m sure glad that I’m not one of those people.
Biggest lesson of the day – DON’T HAVE MORE THAN $100,000 ON DEPOSIT IN ANY ONE BANK … ESPECIALLY NOT TODAY. Don’t assume nor presume your money is safe – read the fine print, and be proactive about protecting your money. YOU are the only person who truly has your own best interest in mind!