Local IndyMac customers looking for answers, cash
By ALEXANDRA BISSONNETTE Special to the Daily Press
WILSHIRE BOULEVARD The IndyMac Bank slogan, “Raise your expectations,” seemed like a cruel joke on Monday as hoards of frustrated customers stood in line in outside the Santa Monica branch for over 7 hours waiting to withdraw their cash.
The failed bank, now under federal control, was closed on Friday, July 11, by the Office of Thrift Supervision (OTS) and the Federal Deposit Insurance Corp. (FDIC) was named the conservator. Regulators are calling the collapse the second-largest bank failure in U.S. history.
“Everyone assumes it will never happen to them,” said a woman outside the bank who declined to give her full name, only identifying herself as J.L. She accompanied her mother to withdraw funds. J.L. and her mother were waiting in the line since 7 a.m. and by 1 p.m. they had yet to receive any answers or be seen by a claims agent.
The fact that principle and interest on insured accounts would be fully reimbursed — up to $100,000 — by the FDIC did not make anyone feel less nervous about their money.
“If you have less than $100,000 you will be insured, no questions,” an FDIC employee told the anxious crowd surrounding him.
FDIC spokesman David Barr said it could take several years before the agency fully addresses customer claims.
IndyMac is the largest regulated thrift to fail and the second-largest financial institution to close in U.S. history.
IndyMac Bancorp Inc., the holding company for IndyMac Bank, had been struggling to raise capital and manage losses from bad mortgage loans.
The banking regulator transferred control of IndyMac to the FDIC because it did not think the lender could meet its depositors’ demands amid a run on bank deposits by customers in recent weeks.
The FDIC insures bank deposits of up to $100,000 per depositor and up to $250,000 for funds in retirement accounts such as an IRA.
As of March 31, IndyMac had total deposits of $19.06 billion from some 275,000 deposit accounts. Of those, some 10,000 depositors had funds in excess of the insured limit, for a total of $1 billion in potentially uninsured funds, the FDIC has said.
The FDIC was telling customers with unsecured deposits that they would receive an advance dividend equal to half of the uninsured amount.
The agency plans to cover all insured deposits and then sell IndyMac assets. Customers with deposits that aren’t fully insured were told to file a claim with the FDIC so they can try to recover a share of any funds left over from the sale of those assets.
Some customers might also be eligible to recoup dollar-for-dollar beyond the 100,000 limit depending on how their accounts are structured, Barr said.
The biggest problem that seemed to face the Santa Monica bank on Monday was a lack of crowd control. The hundreds of customers who gathered outside the door were being let into the bank one at a time, and those who remained outside had to fend for themselves.
“This is such chaos,” said Kay, a Santa Monica resident who had been waiting in line since 8 a.m. Like others in line, Kay refused to give her full name.
“People are cutting in line, the bank is not providing any order,” she said.
Dotty Scalfon, an elderly woman who had been waiting nearly four hours agreed.
“There has been no supervision, no one regulating, no one coming to give us advice,” Scalfon said. “We don’t even know if we will be seen today. They [IndyMac] anticipated this and made absolutely no provisions to make this easier. They should have taken more responsibility.”
“We may sell a portion to another bank, sell real estate. There may be lawsuits. There are a lot of different aspects to this.” — of the bank, Barr said
“We have to completely unwind the affairs”
One man tried to get Scalfon a seat inside to wait, as standing was difficult for her in her walker, but he was told that she would have to wait outside.
Some elderly people fared better, making their way to the front of the line and getting let into the bank ahead of others. When word of this spread, cries of “I’m old!” echoed from all directions.
At a few points throughout the day, officers arrived to monitor the situation, but they did little to control the line of ever angrier customers.
“It’s not against the law to crowd,” said Officer Milosevich of the Santa Monica Police Department. “I can’t arrest people for crowding.”
IndyMac Federal Bank, which is what it is now called following the federal bailout, seemed remarkably low staffed.
There was one representative at the door who handled the slow trickle of people being let into the bank, and two FDIC representatives who would answer only very general questions.
“I am not supposed to make individual recommendations,” one FDIC representative told the group that had gathered around him.
Aside from that, customers were given almost no information other than the fact that the bank would be closing at 5 p.m. and would be open for business again on Tuesday.
Lidya Smith — who had been waiting for five hours — was not nervous about her money, but was frustrated with IndyMac’s poor customer service.
“Five hours and we have been given no water, not even a cookie,” she said. “But, we’re here now, so why come back to the lines tomorrow?”
While the atmosphere outside was chaotic and anxious, the very slow but steady drip of people leaving the bank seemed to give people some hope.
“Finally,” one man exclaimed as he fought through the crowds and made his way away from the bank with his money.
“They are being very cooperative,” said Elaine Levin, who managed to get all of her money back. “If the account is done properly, you can even get over $100,000,” she told the crowd that inevitably swarmed every individual who stepped out of the bank.
One man was particularly nervous about the state of his money, but not just with respect to the IndyMac collapse.
“The feds bailed out IndyMac, but who will bail out the feds,” he asked.
The line, which seemed to be at a complete stand-still, went around the corner of the bank. Even those at the end of the line had been waiting several hours.
“I made a foolish mistake and didn’t check the paper a few weeks ago,” said Robert Trimas from the back of the line. He wished he had foreseen the collapse of IndyMac which had been rumored in recent weeks.
Many people had removed their money from IndyMac earlier this month following comments made by U.S. Sen. Charles E. Schumer (D-N.Y.), chairman of the Joint Economic Committee, who wrote several regulatory agencies urging that they take steps to prevent IndyMac’s collapse.
A preliminary analysis by the FDIC estimates that the cost of resolving the collapse will be between $4 billion and $8 billion. This is particularly daunting considering IndyMac is the fifth FDIC-insured failure so far this year.
In an unstable economy, with a falling dollar and foreclosures on the rise, it is easy to understand why people are concerned about their money, but the situation in Santa Monica was amplified by the customer’s lack of information.
When asked why they were standing in line, one man made clear the reason for the crowd: “We just want our questions answered.”
Originally published in the Santa Monica Daily Press print edition on July 15, 2008. Read the original PDF.