July 14, 2008 / 4:57 PM / 10 years ago

IndyMac borrowers line up in Calif. to withdraw their cash

PASADENA, Calif., July 14 (Reuters) - IndyMac Bancorp Inc IMB.N customers lined up outside a branch at the company’s headquarters on Monday, hoping to withdraw their money after regulators seized what was once one of the largest mortgage lenders in the United States.

Several hundred people arrived around 4 a.m., five hours before the Federal Deposit Insurance Corp planned to open that branch.

Regulators seized Pasadena-based IndyMac on Friday after a bank run in which customers withdrew $1.3 billion of deposits over 11 business days, as worries about the company’s survival grew, regulators said. The bank has 33 branches in Southern California.

The FDIC said the renamed IndyMac Federal Bank will cover insured deposits, mostly up to $100,000, and initially cover 50 percent of uninsured deposits.

“I have $360,000 in this bank, and I was misled by this bank,” said Robert Clark, a Glendale resident who was waiting on line. “I gave the names of my mother, my sister and my brother on the account so I thought I would be insured. I don’t know what to do. I really don’t know what to do.”

John Bovenzi, the FDIC’s chief operating officer, talked with some customers and tried to reassure them as they waited for the doors to open.

“This bank is as safe and as sound as any bank in the country right now,” he told one depositor. Bovenzi added that the FDIC was “going to get as much money as we can” to compensate investors with uninsured deposits.

Jitesh Patel, a doctor from Burbank, said he took a day off work to get his money out.

“We have money we are afraid we are going to lose,” he said. “I wish we were a little more savvy.”

IndyMac is the fifth U.S. banking company to fail this year, and the largest since the 1980s savings-and-loan crisis.

It ended March with about $19 billion of deposits, of which roughly $18 billion were insured, and $32 billion of assets, regulators said.

Gerard Cassidy, an analyst at RBC Capital Markets, on Sunday estimated that 300 U.S. banks might fail over the next three years because of credit losses and tight capital markets.

Regulators expect the IndyMac takeover to cost the FDIC $4 billion to $8 billion. The agency’s insurance fund has about $52.8 billion. (Writing by Jonathan Stempel; Editing by Maureen Bavdek)

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