PASADENA, California (Reuters) - Hundreds of worried IndyMac Bancorp Inc customers descended on the company’s branches on Monday to withdraw their money, after regulators seized what was once one of the largest mortgage lenders in the United States.
Regulators took over the Pasadena-based lender on Friday after a bank run in which customers -- panicked over IndyMac’s survival prospects -- withdrew $1.3 billion over 11 business days, regulators said.
At a branch at IndyMac’s headquarters, customers began arriving at 4 a.m., five hours before the doors opened. The Federal Deposit Insurance Corp now operates the thrift’s 33 Southern California branches.
“I didn’t think anything like this would happen,” said retired teacher Charles Tengeri from Pasadena, who was first to emerge from the branch after withdrawing $171,000 -- about two-thirds of his life savings. “I withdrew as much as I could. I know it’s going to take a little time.”
The FDIC said the renamed IndyMac Federal Bank will cover insured deposits, mostly up to $100,000, and initially cover 50 percent of uninsured deposits.
“I have $360,000 in this bank, and I was misled by this bank,” said Robert Clark, a Glendale resident. “I gave the names of my mother, my sister and my brother on the account so I thought I would be insured. I don’t know what to do. I really don’t know what to do.”
John Bovenzi, an FDIC official working as IndyMac Federal’s chief executive, talked with customers as they waited for the doors to open, assuring one that “this bank is as safe and as sound as any bank in the country right now.”
The FDIC is hoping to sell IndyMac within 90 days. Among IndyMac’s assets are a rapidly deteriorating mortgage loan book, the 33 branches, and the Financial Freedom unit that makes “reverse” mortgages for older Americans.
“I’d like to see if we can sell the institution as a whole to one healthy bank,” Bovenzi said in an interview. “Companies like Financial Freedom have a great deal of value, so there will be a market for those assets.”
The FDIC did not ask Michael Perry, who had been IndyMac’s chief executive, to have a role in operations following the takeover, Bovenzi added.
IndyMac is the fifth U.S. banking company to fail this year, and the largest since the 1980s savings-and-loan crisis.
It ended March with about $19 billion of deposits, of which roughly $18 billion were insured, and $32 billion of assets, regulators said.
Jitesh Patel, a doctor from Burbank, said he took a day off from work to withdraw his money from IndyMac.
“We have money we are afraid we are going to lose,” he said. “I wish we were a little more savvy.”
Bovenzi said he expects more banks to fail in the current credit downturn. “I don’t expect there will be large bank failures,” he said. “There will be small bank failures.”
Gerard Cassidy, an analyst at RBC Capital Markets, on Sunday said 300 U.S. banks might fail over the next three years because of credit losses and tight capital markets.
Regulators expect the IndyMac takeover to cost the FDIC $4 billion to $8 billion. The agency’s insurance fund has about $52.8 billion.
Tengeri, the retired teacher, said he was originally attracted to IndyMac because of the high interest rates it offered on deposits.
Asked if the thrift’s collapse would disturb his retirement, the 70-year-old said: “Very much.”
Writing by Jonathan Stempel; Editing by Maureen Bavdek