IndyMac reopens under eyes of government

updated 4:18 p.m. ET July 14, 2008

NEW YORK - IndyMac Bank, the second-largest financial institution to close in U.S. history, reopened Monday after being taken over by federal regulators.

Hundreds of worried customers lined up to pull as much money as they could from the failed financial institution.

However, federal regulators said it could be years before the affairs of the bank were fully resolved.

Charles Tengeri, a retired school teacher, was the first customer to emerge from the Pasadena headquarters of the bank.

He held a check for $171,000 — an amount that he said represented most of his savings.

"I didn't think this could happen," he said. "But I'm glad to get anything out."

New lending standards
The new chief executive, brought in by the government to manage the failed bank, said new lending standards should prevent the kind of problems that have brought down credit markets.

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John Bovenzi, the chief operating officer of the Federal Deposit Insurance Corp., reassured consumers that U.S. bank failures have been rare in the past, and that if more banks do fail, the government has enough in reserve.

"I think the important point to make is that, historically, only a very small percentage of the banks on our problem banks list ever failed," he said on CNN late Sunday. "While there are 90 banks on the list, there would be no expectation that 90 of those banks would fail."

Bovenzi took the helm of what will be IndyMac Federal Bank when the government stepped in late Friday afternoon to save the struggling institution.

The Office of Thrift Supervision transferred control of IndyMac to the FDIC because it did not think the lender could meet its depositors' demands.

Biggest regulated thrift failure
IndyMac is the largest regulated thrift to fail, regulators said after taking control of the bank. Thrifts differ from banks in that they are required to have at least 65 percent of their lending in mortgages and other consumer loans.

As of March 31, IndyMac had $19.06 billion in total deposits.

Bovenzi reminded consumers that all accounts worth $100,000 and less are automatically insured by the FDIC, which has $53 billion in insurance funds. And he noted that there are ways to structure accounts so that more than $100,000 is covered.

"If there are other bank failures in the coming weeks, I think the same message, if your accounts are under $100,000, you have absolutely nothing to worry about," he said. "You can still find ways to protect more if you like."

Beyond $53 billion, he said the FDIC would have go to other banks to raise more money, adding that in that case, consumers could expect some of that to be passed on in fees.

"Well, obviously it's a difficult time and there were certainly institutions that made loans that shouldn't have been made," he said. "There are standards being put out, hopefully, at institutions with better underwriting going forward so that this problem doesn't repeat itself."

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