Jim Sinclair’s Commentary

Fail to act and this could be you:

"Some depositors at the failed thrift, seized by regulators, leave without all of the funds that were in their accounts. Bank shares slide, but institutions say they are well-capitalized."

Banks hit by fallout from the crisis at IndyMac
By E. Scott Reckard and Andrea Chang
Los Angeles Times Staff Writers
July 15, 2008

As thousands of customers waited hours in the heat Monday to withdraw deposits from failed IndyMac Bank, investors dumped the stocks of many mortgage lenders, precipitating the steepest one-day decline in banking shares since 1989.

Southern California fixtures Downey Financial Corp. and FirstFed Financial Corp., specialists in the nontraditional mortgages that fueled the housing boom, were among the hardest hit, with their stock prices down 24% and 19% respectively. Shares of Washington Mutual Inc., the biggest savings and loan, fell nearly 35%.

Keefe, Bruyette & Woods bank analyst Frederick Cannon said one big fear for the banks was that depositors, seeing what was happening on Wall Street, would begin to pull their funds out. That, he said, could create risks for even a reasonably healthy bank in a hurry.

Branches of Pasadena-based IndyMac, which federal regulators seized late Friday, were thronged by customers, many of them elderly, seeking to withdraw deposits, even though most were fully insured by the Federal Deposit Insurance Corp.

The FDIC, which was running the bank on Monday, sought to reassure depositors with less than $100,000 held in a single name or $250,000 in a retirement account that their money was safe.

But an estimated 10,000 IndyMac customers had deposits that exceeded those limits. Among them was 70-year-old Charles Tengeri, a retired teacher from Pasadena, who arrived at IndyMac's headquarters at 4 a.m. and grabbed one of the first spots in line. Tengeri had more than $200,000 in five certificate of deposit accounts -- his life savings, he said. After waiting five hours, he left with a check for $171,000.

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