IndyMac failure to cost FDIC $4 billion to $8 billion

Federal regulators closed IndyMac Bank Friday afternoon and transferred operation to the Federal Deposit Insurance Corporation.

With $32 billion in assets, it was the second largest deposit institution to close in U.S. history, according to a release from the Office of Thrift Supervision. Only the 1984 failure of Continental Illinois, with $40 billion in assets, was larger.

In a separate release, the FDIC estimated that the failure will eventually cost the agency’s insurance fund between $4 billion and $8 billion.

“This institution failed today due to a liquidity crisis,” OTS Director John Reich said in the release. “Although this institution was already in distress, I am troubled by any interference in the regulatory process.”

He referred to the public release June 26 of a letter from New York Senator Charles Schumer to the OTS and FDIC worrying about the viability of IndyMac.

In the following 11 business days, the OTS said, depositors withdrew more than $1.3 billion from their accounts.

IndyMac’s failure had been widely expected. IndyMac Bancorp CEO Michael Perry did, indeed, have the toughest job in America this week.

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