IndyMac Adds to FDIC Bank Closings in 2008

When we place our money in a bank, we do so with the assumption that our money is safe. The promise of FDIC insurance is part of what gives us this feeling of security. The Federal Deposit Insurance Corporation (FDIC) assures us that in the event the bank is unable to return our money to us, the FDIC itself will guarantee up to $100,000 of our money deposited in ordinary accounts. Certain entitlement or IRA accounts may be insured for higher amounts. For most Americans, this is more than enough since the FDIC insurance mainly covers savings and checking accounts.

Number of FDIC Bank Closings

In 2008, it looks like FDIC insurance is shaping up to play an important role in protecting depositors. The FDIC website, FDIC.gov, lists 5 banks that have failed already this year, including the most recent closure, IndyMac Bank of Pasadena, CA, on July 11^th, 2008. This is the highest number of FDIC reported bank failures since 2002, which saw 12 insured bank failures. Since 2000, FDIC intervention has been required for a total of 33 bank closings.

Complete List of 2008 Bank Failures

The five bank failures reported so far by the FDIC for 2008 are:

IndyMac Bank, Pasadena, California closed July 11^th, 2008

First Integrity Bank, NA, Staples Minnesota closed May 30^th, 2008

ANB Financial Bank, NA, Bentonville, Arkansas closed March 7^th, 2008

Hume Bank, Hume, Missouri closed March 7^th, 2008

Douglass National Bank, Kansas City, Missouri closed January 25^th, 2008

What if an Account at IndyMac Bank had more than $100,000?

When the FDIC steps in and closes a bank, it essentially seizes the assets of the bank. The value of these assets will be divided among those people with bank deposits or accounts in excess of the $100,000 insured amount. The exact amount to be paid will depend upon the liquidation value of those assets. Based on an early analysis, the FDIC has stated in a press release dated July 11^th that they will reimburse account holders 50% of the amount of non-covered accounts even prior to the full disposition of IndyMac Bank assets. Usually, the FDIC will pay these declared payments within 30 days of the announcement.

Of course, loans that were payable to IndyMac Bank are considered part of the bank's assets. As such, loan customers of IndyMac Bank should continue to make their loan payments or be subject to the usual penalties for late or missed payments.

How Does one Receive FDIC Insured Amounts?

The FDIC has transferred all the insured accounts from the closed IndyMac Bank to a new bank they have created called IndyMac Federal Bank. Customers with insured accounts can access their money through the newly chartered IndyMac Federal Bank.

Unfortunately for investors who owned stock in any FDIC closed bank, stockholders are last in line to receive a share of any remaining assets and stand to be the biggest losers in these situations.