FDIC says IndyMac failure costs more than expected

August 26, 2008 by · Leave a Comment
Filed under: Bank Failure, Industry News 

Surprise Surprise, atleast it was just a bit over the high-end of their insurance cost estimate. It will be interesting too if the FDIC can sell IndyMac’s assets whole or in pieces and what sort of prices they will fetch. If we use fair market valuations then that should help us determine the value of certain types of asset classes are actually worth when they need to go to market.

Another interesting piece of information in the Reuters release was their “problem banks” watch list is now up to 117, from under 100 less than a month ago. I believe this is a sign of more things to come as we de-leverage the banking system and get rid of all the excess. Delaying the medicine no matter how painful always makes the recovery worse.

Release:

A U.S. banking regulator said the failure of mortgage lender IndyMac Bancorp Inc will deliver a bigger blow to its insured deposit fund than originally expected. The Federal Deposit Insurance Corp said on Tuesday it now expects IndyMac’s failure in July to cost its insurance fund $8.9 billion, compared with the previous expected range of $4 billion to $8 billion.

The FDIC also said during its quarterly bank briefing that it will soon start widely marketing IndyMac’s assets.

“We hope to market it certainly in the third quarter,” FDIC Chairman Sheila Bair told a news conference. “I think we’re going to be marketing it both as a whole bank as well as in pieces.”

Nine U.S. banks have failed this year, including IndyMac, which became the third-largest U.S. bank failure ever. It was one of the 117 problem banks on the FDIC’s second-quarter watch list of institutions with financial, operational or managerial weakness that threaten their financial viability.

IndyMac accounted for $32 billion of the combined $78 billion in assets of problem banks on the FDIC’s watch list.

The FDIC said its Deposit Insurance Fund fell in the second quarter to $45.2 billion, down from $52.8 billion at the end of the first quarter, due to an increase in bank failures.

The agency oversees the industry-funded reserve used to insure up to $100,000 per deposit and $250,000 per individual retirement account at insured banks.

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