Reeling Under Rising Foreclosures Indymac Enforced To Down Shutters

July 21st, 2008

Enforced by the government IndyMac reeling under the impact of rising foreclosures had to down shutters last week. Its assets were taken over by regulators. The mortgage lender could not stand up to the pressures of tighter credit, falling real estate. IndyMac is the second largest mortgage body after Freddie and Fannie duo. It became the second largest financial body to close ignominiously in the history of USA.

According to the office of Thrift Supervision the IndyMac’s operations were taken over by the Federal Deposit Insurance Corporation because there was a general feeling of certainty that IndyMac would not be able to honour the demands of the depositors. Its customer transactions were limited to taking out money through automated teller instruments over the weekend and handling debit card transactions or cheques. From this week under the new regulators online and phone banking would come into operation.

The OTS Director John Reich said that the IndyMac failed because of liquidity crisis. In other words ultimately it is the raging foreclosure crisis that is gnawing into the roots of the financial system of the country. The foreclosure story started with the melt down of sub-prime mortgages.

The take over of IndyMac, according to FDIC will cost anything from $4 billion to $8 billion. The fall of IndyMac follows that of Continental Illinois National Bank that had in assets about $40 billion when it collapsed in 1984.

Alan Sands is one of the many affected by the take over. He called on the headquarters of the bank in Pasadena to find out when he could take out money. Sands hopes that the FDIC insurance will tide over the crisis for depositors like him. Many other customers were anxiously hanging around the bank pouring over leaflets distributed by the staff. A toll free number was put into use for the use of bank customers.

With foreclosures continuing to plague the country the next big question that is on the lips of everybody is what will the government do with the top giants in the mortgage world – Fannie Mae and Freddie Mac? The shares of the two giants dropped to a record low since the last 17 years. Wall Street is gearing up for the inevitable bail out of the nation’s largest mortgage financiers by the government. Their failure will be catastrophic for the economy that is already tottering.