After some depositors pull funds, IndyMac responds to latest rumors about its health; says it’s working with regulators
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UPDATE: Comments from Sen. Schumer’s office now are included below.
Pasadena-based mortgage lender IndyMac Bancorp, battling fresh rumors that it is near collapse, conceded today that its financial position ‘has deteriorated since last quarter,’ and said it was working on a plan with its regulators to improve ‘the safety and soundness’ of the bank.
The company’s statement, put up on its corporate website, follows a weekend that saw depositors line up at some of its San Gabriel Valley branches to pull their money, as they reacted to news reports questioning the company’s survival.
It’s no secret on Wall Street that IndyMac has been ailing in the wake of huge losses on its loan portfolio as borrower defaults surge. The company’s stock price has been hammered down to mere pennies, and the plunge in the shares has accelerated over the last week. They ended at a record low of 62 cents today, down 23% from Friday’s close of 81 cents.
But depositors may have been spooked by a letter late last week from Sen. Charles E. Schumer (D-N.Y.) to the Federal Deposit Insurance Corp., the Office of Thrift Supervision and the Federal Home Loan Bank of San Francisco, saying he was ‘concerned that IndyMac’s financial deterioration poses significant risks to both taxpayers and borrowers.’
The letter stunned some Wall Street analysts, who said Schumer was in effect sealing the lender’s fate by raising the prospect of its failure. Schumer’s response? Don’t kill the messenger. “Make no mistake about it: IndyMac’s problems were caused by IndyMac’s management and no one else,’ Schumer spokesman Brian Fallon said in an email. ‘The home loan bank system has an obligation to lend responsibly and police its members. But it has not been doing its job. We have found the only way to get the home loan bank system to act appropriately and positively is to make public the concerns we’ve already expressed privately.’
In its statement today, IndyMac said that after the Schumer letter appeared in the media, ‘we did experience elevated customer inquiries and withdrawals in our branch network last Friday and on Saturday of roughly $100 million.’ IndyMac said that amounted to about 0.5% of its total deposits of $19 billion.
‘While branch traffic is somewhat elevated this morning, it is substantially lower than on Saturday,’ the bank said. It added that more than 96% of its deposits were fully insured by the FDIC (meaning the accounts were within federal insurance limits, and therefore should be safe no matter what happens to the company).
But the final part of IndyMac’s statement sounds more like a plea than a declaration that it will survive: ‘We are hopeful that this issue appropriately abates soon,’ the bank said about the deposit outflows, ‘so that we can focus, with our regulators’ involvement, on the important issue of continuing to keep IndyMac Bank safe and sound through this unprecedented crisis period.’
Separately today, the non-profit Center for Responsible Lending published a report slamming IndyMac’s lending practices in recent years. Read it here.