Personal About Politics: Run on IndyMac Bank; It All Has A Familiar Ring

It was a startling sight. A long line of people turned the corner, extended down the block and snaked through the parking lot, with police standing by for crowd control, which was not necessary. The crowd was quiet and subdued. Nervous.



It took me a minute to register what was going on as I stopped for a red light. Then I noticed the IndyMac branch.

This was an honest to God run on a bank!

I drove by slowly still having a difficult time absorbing the situation. I went home to get my camera and took a few photos of the local branch before heading up to the IndyMac headquarters in Pasadena. IndyMac, anchor of a large, ostentatious building, is located on a prominent corner in downtown Pasadena, and was completed less than a year ago. It was a symbol of their so-called growing prosperity, built on the back of sub-prime mortgages.



The Ralph’s parking lot was full with at least 15 T.V. crews parked facing the building with on-going commentary. Several policemen stood near by. Again, a single file line of people wrapped around the huge building, moving slowly. Everyone was quiet, contemplating the fate of their life savings. It was an almost slow motion tableau. Men in suits stood ready to answer questions, and for every 5 customers it seemed there was a media person with a camera and a microphone.

IndyMac closed on Friday.  By the weekend the Federal Deposit Insurance Corp. (FDIC) had taken control, with John Bovenzi, chief operating officer of the FDIC named CEO of the newly named IndyMac Federal Bank. On Sunday, Bovenzi was trying to reassure customers that it would be “business as usual.”

Not so much, no.

Customers with less than $100,000 deposited or less than $250,000 in a retirement account have full access to their money.  However, for the estimated 10,000 IndyMac depositors who had a collective $1 billion over federal insurance limits, the news was mixed. The agency said it would give those customers up to 50% of their uninsured deposits. (LA Times)

Home equity lines of credit issued by the bank would be frozen pending a review of each account.

Does all of this have a familiar ring?

How about the U.S. Savings and Loan crisis of the 1980s and 1990s? That crisis ultimately cost the U.S. government $124.6 billion dollars to bail out the industry. Between 1986-1995, over 1,000 banks, half of which were in Texas, with total assets of over $500 billion failed.

Silverado Savings and Loan collapsed in 1988, costing taxpayers $1.6 billion. Neil Bush, son of then Vice President of the United States George H. W. Bush, was Director of Silverado at the time. Neil Bush was accused of giving himself a loan from Silverado, but he denied all wrongdoing.

As a director of a failing thrift, Bush voted to approve $100 million in what were ultimately bad loans to two of his business partners. And in voting for the loans, he failed to inform fellow board members at Silverado Savings & Loan that the loan applicants were his business partners.

Neil Bush paid a $50,000 fine and was banned from banking activities for his role in taking down Silverado, which cost taxpayers $1.3 billion. A Resolution Trust Corporation Suit against Bush and other officers of Silverado was settled in 1991 for $26.5 million.

A Republican fundraiser set up a fund to help defer costs Neil Bush incurred in his S&L dealings.

The failure of Lincoln S&L set off what became known as the Keating Five political scandal, in which five U.S. senators were implicated in an influence-peddling scheme.

In 1989, the Lincoln Savings and Loan Association of Irvine, Calif., collapsed. Lincoln's chairman, Charles Keating, was faulted for the thrift's failure. Keating, however, told the House Banking Committee that the FHLBB and its former chief Edwin J. Gray were pursuing a vendetta against him.

Gray testified that several U.S. senators had approached him and requested that he ease off on the Lincoln investigation. It came out that these senators had been beneficiaries of $300,000 (collective total) in campaign contributions from Keating. Lincoln Savings and Loan's collapse is said to have cost taxpayers $3.4 billion.
 
The subsequent investigations implicated five senators, accusing them of improperly aiding Keating. After a lengthy investigation, the Senate Ethics Committee determined in 1991 that Alan Cranston, Dennis DeConcini, and
Donald Riegle had substantially and improperly interfered with the FHLBB in its investigation of Lincoln Savings, and their political careers were cut short. The remaining two senators were rebuked for “poor judgement” for intervening with the federal regulators on behalf of Keating.

The two “rebuked” senators? John Glenn and John McCain.




Cheri Cabot – Political Correspondent
Cheri's column, "Personal About Politics", published weekly, will reflect on how the life of a 58 year-old, middle class woman is affected by politics, policy and the current state of the nation - a look at the personal aspects of politics. The articles will be posted to Politics.gather.com as part of Gather Essentials.

Cheri is a single, freelance writer living in Southern California.  She has two grown children, one in Iowa and one at Columbia University, and is the proud grandmother of two. Cheri is also a purveyor of fine coffee, warm chatter and dry wit.

You can find all of Cheri's columns on "Personal About Politics" at www.ccabot.gather.com and www.personalpolitics.gather.com.