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:

     LA Bus Journal: Schumer raises prospect of IndyMac Bank Failure


     LA Times: IndyMac Denies It’s Close to Collapse

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 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 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”:

     CNN: 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 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!

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About the Author

Midlife Bachelor chronicles lifestyle, dating, and relationship experiences and advice to avoid a midlife crisis. Readers like you are often beyond young adulthood in their 30’s, 40’s, and 50’s that want to understand how dating, sex, relationships, and love fit in with our lifestyles.