May the Year of the Ox be fantastic for all of us and our families!
Observers said that experience influenced the way the FDIC handled the subsequent 20 failures.
“It’s fair to say that the FDIC did not want another IndyMac,” Mr. Dennis said. “They do not want CNN panning crowds lined up to try and get their deposits before the bank opens in the morning.”
Since then the vast majority of the FDIC’s receiverships have covered uninsured depositors, preventing the kind of fallout that results from customers losing money. Of the 20 banks that failed after IndyMac, 16 of the transactions fully covered uninsured customers.
Some observers raised questions that the FDIC had violated its statutory mandate to find the least costly resolution, arguing that while protecting all depositors may be in the public interest, it is not the law.
“The statute doesn’t say anything about public confidence,” said Bert Ely, an independent consultant based in Virginia and a critic of the agency. “I don’t have a problem with protecting all depositors, but there ought to be an open debate about it.”
But FDIC officials said protecting depositors was not their idea, but the result of the bidding process. Some observers said banks are more likely after IndyMac to seek to protect deposits for fear of starting a panic.
“If the bidders are willing to pay enough traditional money to pay the uninsured, then they’re protected,” said Art Murton, the director of the FDIC’s division of insurance and research. “That’s not something really we control. It’s really a function of the value of the franchise, and how the bidders view it.”
It is clear, however, that the FDIC has responded to failures more creatively since IndyMac.
I sent this message to Armel Leslie this morning. He is the pr person for John Paulson, the hedgefund investor who is buying troubled assets.
From: firstname.lastname@example.orgTo: email@example.comSent: Wed, 31 Dec 2008 6:22 amSubject: john paulson on bloomberg this morning
I noticed you are the PR representative for John Paulson and that he is apparently attempting to buy IndyMac and increase his profits from buying troubled assets. However, we are a group of IndyMac depositors who are awaiting the restoration of 50% of our removed funds and closely folllowing Congressional lack of regulation, supervision and oversight by agencies such as the FDIC and OTS.We are also tracking this sale and feel that your appearances in Congress could factor us in – rather than out. We are also following the Treasury’s investigation of Darrell Duchow.I am interested in being in touch with you as quickly as possible so that this occurs speedily. It is pitiful that this Congress and its agencies are apparently going to take the plight of depositors set them up for the success of a hedge fund investor.
John Paulson [no relation to Henry], the very same hedgefund investor who is trying to buy IndyMac said on Bloomberg this morning that hedge fund investors who want to withdraw their funds should be allowed unlimited access to their capital. This is in light of the Madoff scandal and potential changes to regulations to allow them to do so.
Dec. 31 (Bloomberg) — John Paulson, who runs the $36 billion hedge-fund firm Paulson & Co., has some harsh words for his peers and their tendency this year to block or curb clients’ attempts to get their money back.
“We think it’s a mistake for managers to use gates and other tools to limit investor access to their funds,” Paulson wrote in a 2009 outlook to investors. “While we recognize the difficulties of the current environment, we think it is a manager’s responsibility to raise liquidity to meet the redemption needs of their investors.. . .
All of Paulson’s funds profited last year buying credit default swaps on mortgage assets, which are instruments that rise in value as the risk of default increases. Paulson told investors in November that he had increased his holdings of derivatives that gain in value when the chances of corporate credit defaults rise.
Paulson’s Advantage Plus fund has climbed 29 percent this year through October while many managers are enduring the worst year of their careers. ”
On July 13, immediately after the FDIC takeover, Andrew Gray published a news release citing Sheila Bair’s “help to depositors” to re-structure accounts that were over if there were problems with named beneficiaries. After depositors apparently “self-identified”, helping the FDIC remove 50% of funds that were over, that release was first changed and the url directed to another release on the FDIC site – without that sentence. Later, the cache file for the release was totally obliterated – as if it never existed.
This is the language of the original, changed and then obliterated release. Given the fact that Congress has been so quick to issue a $700 billion bailout, I continue to wonder why the FDIC’s communications policies which benefit itself, banks and their lobbyists far more than depositors – have escaped Congressional scrutiny.
“All bank depositors should also understand that they can have insurance coverage in excess of the basic limits of $100,000 per institution, with an additional $250,000 per institution for IRAs. For instance, subject to certain conditions, single and joint accounts are separately insured, and revocable trusts generally provide $100,000 of coverage per beneficiary. If you have any questions about whether your deposits are insured, we encourage you to consult with your bank or contact our deposit insurance specialists at 1-877-ASK-FDIC. If you find that you are not fully insured, it may be possible to restructure your accounts to bring your deposits below the insured limits. But first get the facts before making any changes in your accounts or banking relationships.”
I just came across your blog today and would like to share a story that you may publish. I like so many others here was mislead many times by Indymac Banking officials that all my accounts were fully insured. I called several times and was assured that my accounts were all fully FDIC guaranteed. Even on the Monday after the bank was closed teller 240 reviewed my accounts and I received the same answer that all was in order.
Of course after going through the gut wrenching process of the FDIC interview I found out different. I lost a lot of money due to incorrect bankers information.
I wrote my Congressman, but have never received any answer from him or his staff. I wrote him again after the FDIC changed the rules and was told by FDIC officials that it would NOT include Indymac customers. Had the new rules been made retroactive I would have not lost one dime of money. What an injustice to those of us that trusted the Bank and the government is doling out billions of dollars to save so many other banks. I even called the FDIC to see if they were receiving any of the TARP money but was told no.
Now that it looks like the Bank is going to be sold for 14 billion and you do the math there won’t be enough money to pay the uninsured depositors. They will actually be losing money on the assets as far as I can tell, which will leave nothing for us. When I called the FDIC this morning to run the scenario by one of the agents to see if I was understanding the math right she agreed, but could not comment since nothing had been officially announced. It looks like a fire sale to me for the FDIC to get rid of the Indymac headache. I realize this isn’t the best time in our economic crisis to be selling a bank. It’s just to bad that innocent and careful depositors will probably take it in the shorts on this one. I guess the next few days will tell the story.
If there is anything I can do to help our cause please let me know and I’m very glad to have found your blog. If nothing else I don’t fell so alone in this unjust mess.
Here is the latest news on the potential Indymac sale. http://www.housingwire.com/2008/12/30/fannie-mae-holding-indymac-deal-hostage-sources-say/ No mention whatsoever regarding what will become of the depositors that are still waiting for their money from the FDIC. Apparently everyone has their hands in the pie. While the FDIC continues to work a backroom deal with a private equity consortium known as HoldCo, who is looking out for the best interest of the depositors? I thought the FDIC could run Indymac for years if necessary. Clearly Indymac Federal Bank is entitled to TARP funds. Just use some of the TARP money to purchase the “toxic” mortgages and GIVE US DEPOSITORS OUR MONEY BACK !!!
This balance sheet is published on the web, but for your convenience, you may CLICK HERE to view it. Definitely looks like our higher math skills are not needed to see a deficit here. Take a peek for your self. The FDIC initially came up with a statement of $8.9 billion as their cost, now it’s running $16.6 billion? Well, the offer is in (according to the press) for $14 billion. Where is the $540 million for us? It already looks like a $2.6 billion dollar deficit.
David noticed that the FDIC removed all of their office phone numbers from the FDIC web site. He saved an original copy with all the office phone numbers to the D.C. and field offices, which do NOT appear on the FDIC webs site any longer. Now you may CLICK HERE to get them all!
I was appalled this morning when I went to the FDIC official website http://www.fdic.gov/about/contact/directory/index.html to contact the Division of Resolutions & Receiverships only to find that all the phone numbers for the contacts from their Headquarters have conveniently been deleted from the FDIC websight. Shame on the FDIC. They have obviously confused the concept of trying to be more “transparent” with that of being more “invisable”. Clearly they are trying to avoid our phone calls so they do not have to deal with the depositors from Indymac. Lucky for them I saved the original list with the phone numbers from when Indymac first failed because I suspected that the FDIC might try and do something like that. I will contact Lisa to see if she can post the list I have so we can contact FDIC officials with our concerns, comments and questions. Your comments are greatly appreciated. Thank you.