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FBI Said To Be Investigating IndyMac Amid Bank Run

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The Associated Press

Published: July 17, 2008

LOS ANGELES - Diane Klein wasn't sure what she would trust more to hold her money - IndyMac Bank or a hole in her backyard.

The retired teacher was among hundreds of people who have crowded outside IndyMac Bank branches across Southern California this week, many waiting hours in line to withdraw their funds from the failing bank that was seized by federal regulators.

"Once I get in the door, I'm going to get every penny I can out of there," Klein told The Associated Press while waiting in line outside the bank's headquarters branch in Pasadena. "I'm going to bury it in the backyard."

IndyMac was said Wednesday to be under investigation by the FBI for possible fraud in connection with home loans made to risky borrowers. The investigation was focused on the company and not individuals who ran it, a law enforcement official who was not authorized to speak publicly about the investigation told the Associated Press.

Most depositors were given immediate access to up to $100,000 in their accounts and 50 percent of any money beyond that threshold, although depositors with joint accounts or retirement accounts could immediately withdraw greater sums, said David Barr, a spokesman for the Federal Deposit Insurance Corp., which is now operating the bank.

Depositors were given receivership certificates for any money they couldn't immediately withdraw and may be able to receive some of that money after the bank's assets are sold, he said.

About 10,000 of IndyMac's 275,000 accounts contained uninsured sums, and uninsured money made up about $1 billion of the bank's $19 billion in deposits, he said.

Barr said the FDIC has fielded complaints from depositors who said money was missing from accounts being closed. He said the incidents were isolated and stemmed from bank tellers' failure to identify interest as available funds in accounts that depositors had in trust for family members or other beneficiaries.

The FDIC was combing IndyMac records for uncollected interest and would be sending checks to depositors in the coming days, Barr said.

He did not know how many depositors had not been given their full interest during bank visits.

Klein said she chose to deposit her money with IndyMac because of its high interest rates but now stood to lose some of her investment. She said her account has more than the federally insured limit of $100,000.

"I worked my whole life for this money," she said. "It's kind of scary."

People waiting outside IndyMac branches have gotten emotional at times. At one point police had to be called to a branch in the normally quiet Encino neighborhood of the San Fernando Valley. Tempers grew short Tuesday when customers who had arrived before dawn accused others of cutting in line.

The Office of Thrift Supervision transferred control of the bank to the FDIC on Friday because it didn't think IndyMac could meet depositor demand. Over the weekend, it became IndyMac Federal Bank, FSB, and by Monday morning the scramble by bank customers to recover their money was on.

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