Bank failures are not common occurrences. And seeing a large group of people lined up at 7:30AM in a prime Southern California location with distraught faces ready to withdraw their money from the now taken over IndyMac Bank was even more surreal. The idea of a large brick and mortar institution not keeping […]
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■IndyMac: IndyMac History and Collapse. The Saga of the Second Largest Bank Failure in History, here in Sunny Southern California.
■Affordable Housing: Finding Affordable Housing just got Easier in California.
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Bank failures are not common occurrences. And seeing a large group of people lined up at 7:30AM in a prime Southern California location with distraught faces ready to withdraw their money from the now taken over IndyMac Bank was even more surreal. The idea of a large brick and mortar institution not keeping your money safe is enough to unnerve the strongest of us. Bank failures may seem like part of a distant past associated with the Great Depression or the S & L crisis but certainly not to our current era.
Since 2000, the FDIC has recorded 32 bank failures. I have compiled this list from FDIC data and have also added a column to show the amount of assets taken over. What you’ll find is digging into the data for yourself is much more telling than listening to the media:
So what is the big deal with IndyMac Bank? Take a look at this sobering fact:
IndyMac Bank Total Assets: $32 billion
All Other 31 Combined Bank Failures since 2000: $8.97 billion
Basically IndyMac Bank had about 4 times the amount of assets as all the other 31 bank failures of this decade combined. This is an important contrast since I’ve been seeing the media currently say things such as:
“We won’t have as many bank failures as the past…”
“Only 5 banks have failed this year…”
“We only have 90 banks on our troubled list…”
As you can see from the above, depending on which banks are on the list and their size, having a handful of bank failures the size of IndyMac Bank would be the equivalent of 500 to 1,000 smaller banks failing. It may come as no comfort that IndyMac wasn’t even on the troubled list.
In today’s article we are going to take a look at a few photos of what occurred on Monday. This is part XIV of our Lessons from the Great Depression series:
1. Personal Story by a Lawyer from a Previous Asset Bubble. Can we Learn from the Past and How will the Housing Decline Impact You?
2. Lessons From the Great Depression: A Letter from a former Banking President Discussing the Bubble.
3. Florida Housing 1920s Redux: History repeating in Florida and Lessons from the Roaring 20s.
4. The Menace of Mortgage Debts: Lessons from the Great Depression Series: Part IV: Where do we go After the Housing Crash?
5. Business Devours its Young: Lessons from the Great Depression: Part V: Destroying the Working Class.
6. Crash! The Housing Market Free Fall and Client #10 Contagion.
7. Winston Smith and the Bailouts in Oceania: Lessons from the Great Depression Part VII.
8. Sheep Back to the Slaughter: Lessons from the Great Depression Part VIII: All the Change and Bear
Market Rallies.
9. A Bubble That Broke the World
10. The Sham of our Current Unemployment Numbers
11. Understanding the Impact of Asset Deflation and Consumer Inflation.
12. Is the DOW now Tracking with the California Housing Market?
13. The Federal Reserve.
Photos Then and Now
Reports from all across Southern California discussed the panicked mood of many customers at IndyMac locations all across multiple cities. Eugene Garcia over at the Orange County Register has been kind enough to give us permission to use some of the photos:
*Source: OC Register Eugene Garcia
In this picture you’ll notice a line that according to reports, had approximately 100 people. You’ll also notice that a large number of the customers are nearing or in retirement. Not a good place to be in especially if you are dependent on this money and had over $100,000:
“(LA Times) 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.
“It’s not 100%, but it’s better than nothing,” said Tengeri, who still has more than $50,000 tied up in the bank. “It’s not fair. . . . I’m praying for it, I’m crossing my fingers for it, but I don’t know.”
In this case, assuming the total deposit in the bank was $221,000 leaving the bank with $50,000 locked up is a 22% reduction of the original amount. That is a hefty amount given that you are not suppose to lose any of your principal at a bank. According to reports, $1 billion of deposits are beyond the $100,000 FDIC limit. No wonder why folks at a Mission Viejo location had one thing on their minds:
*Source: OC Register Eugene Garcia
It is pretty clear what the intention of today’s visit was. The FDIC tried to reassure people that their money was fine but most folks do not want to leave their money in an institution that gambled recklessly in the housing market. Why would they? There are other institutions that are sounder and people now realize that old mantras like “real estate never goes down” are sometimes hard sales pitches. People are looking to protect their money. And if you think people are trusting their government who have recklessly allowed the dollar to plummet and have squandered any semblance of prudence, think again. People are now starting to push the first domino on other institutions:
“(LA Times) Anne Martin, 56, wasn’t taking any chances Monday. She went first to an IndyMac branch in Arcadia to liquidate a certificate of deposit, then planned to go to Downey Savings, where she intended to close another CD amid speculation it would be the next bank to fail.
“I’m going there after this,” she said. “I know they did a lot of loans, and I’m afraid they’re going to be caught up in the same situation.”
At a Downey branch in Arcadia, Doris Crosby of Pasadena was transferring money from another bank, where it hadn’t been insured, into her checking account despite hearing rumors that Downey was in trouble.
“I just have this feeling I’m jumping from one frying pan to another,” Crosby, 82, said. “I just don’t know what to do.”
People are simply not happy about this and rightfully so. Here is a picture from a different angle at the Laguna Woods location:
*Source: OC Register Eugene Garcia
There were reports from long lines at:
Pasadena
Los Angeles
Laguna Woods
Mission Viejo
Long Beach
And I’m sure other locations had similar reactions. Although the housing crisis and credit debacle have been going on for sometime, seeing large banks in trouble and people scrambling for their money will hopefully light a fire with our politicians. Unfortunately they take this as a pass to bailout every nook and cranny of the economy but all we get is corporate welfare for those on Wall Street while middle class Americans, many pictured above struggle to keep enough money for a dignified retirement.
The reason these pictures are so rare is that you would have to go back to the Great Depression to see long lines of people waiting to take their money out of large banking institutions:
If the FDIC is telling us that we have 90 to 150 more troubled banks, how can anyone say with a straight face that we will have a second half recovery? In fact, according to current government measurements we aren’t even in a recession! According to government data, inflation is moderate, unemployment is dandy, and we are following a strong dollar policy. I think people are now realizing the emperor has no clothes and are starting to awake from a decade long financial apathy quelled by debt.
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Bank Failure: IndyMac Bank. Lessons from the Great Depression Part XIV. Bank Failures.
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Related Posts:
■The Lords of Money Speak: Even the Prime Will Fall. Lessons From the Great Depression Part XV. The King JPMorgan Speaks.
■IndyMac: IndyMac History and Collapse. The Saga of the Second Largest Bank Failure in History, here in Sunny Southern California.
■Affordable Housing: Finding Affordable Housing just got Easier in California.
■IndyMac Bank: Bank Failure, Long Lines, and a Real Home of Genius. Another Reason why IndyMac Bank Failed.
■The Sham of our Current Unemployment Rate Numbers: Lessons from the Great Depression: Part X. Data Mining.
Via [DrHousingBubble]
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30-day delinquency trending among JP Morgan’s prime mortgage porrfolio. (Source: investor presentation)
This post is part of a series on celebrity spokespeople who ended up doing serious harm to the brands they were hired to promote, or vice versa. See how we rank the 
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Every day, I get a variety of media pitches from companies and PR folks. No doubt, I try to evaluate all of them. 
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