IndyMac Bank, a prolific mortgage specialist that helped fuel the housing boom, was seized Friday by federal regulators in one of the largest bank failures in U.S. history.
The Pasadena, Calif., thrift was one of the largest savings and loans in the country with about $32 billion in assets. It now joins an infamous list of collapsed banks, topped by Continental Illinois National Bank and Trust Co., which failed in 1984 with $40 billion of assets.
IndyMac specialized in Alt-A loans, a type of mortgage that can often be offered to borrowers who don't fully document their incomes or assets. The company sold most of the loans it originated but continued to hold some on its books. As defaults piled up, IndyMac's finances deteriorated.
The bank will be run by the Federal Deposit Insurance Corp., a federal regulator, and will reopen Monday.....
An exodus of depositors added to IndyMac's woes. Deposits are the lifeblood of banks, providing them with a stable, low-cost source of cash to fund their daily operations and lending activities. After Mr. Schumer raised questions about the bank, depositors withdrew $1.3 billion in 11 days.
The FDIC estimates that the failure will cost its deposit insurance fund between $4 billion and $8 billion.
The FDIC had $52 billion of capital. Now they'll have $6 billion less.