Many more US bank failures likely after IndyMac

[girl gone mad]

NEW YORK, July 13 (Reuters) - U.S. banks may fail in far greater numbers following the collapse of the big mortgage lender IndyMac Bancorp Inc, straining a financial system seeking stability after years of lending excesses.

More than 300 banks could fail in the next three years, said RBC Capital Markets analyst Gerard Cassidy, who had in February estimated no more than 150.

Banks face pressure as credit losses once concentrated in subprime mortgages spread to other home loans and debt once-thought safe. This has also led to investor worries about the stability of mortgage finance companies Fannie Mae and Freddie Mac; IndyMac is not related to either.

While analysts declined to say which banks will fail next, several smaller lenders and one large one, Washington Mutual Inc, appear already to have elevated levels of soured loans, relative to their sizes.
"You have to look at companies with the greatest exposure to the highest-risk assets, which include construction loans and exotic mortgages," Cassidy said. "The final nail in the coffin for any depository institution would be a funding crisis where it is unable to gather deposits at reasonable cost, or wholesale funding markets are cut off."

The Federal Deposit Insurance Corp seized IndyMac on Friday after a bank run in which panicked customers withdrew more than $1.3 billion of deposits in 11 business days.

http://www.guardian.co.uk/business/feedarticle/7649271

[Xenotime]

1. Taking your money right now is the smartest thing to do right now.

Get it out of 401ks, Savings accounts, and other "soft money" tools.

[Captain Angry]

3. You're an idiot.

I can't put it any nicer than that.

Getting out of a 401(k) would involve massive penalties. Where should somebody who has saved $100,000 to $1,000,000 put that cash? In a sack with a $ on the front and keep it under the bed? Get real. A fire or theft, and that person's entire life savings are gone.

A better way for you to have said that would have been: If you're worried about things, go see a financial adviser who can tell you what your real options are.

So, you freak a bunch of people out, they eat 40% of their 401(k) for early withdrawal, and then what?

[enid602]

6. trouble

I keep mine with Vanguard, and as far as I know, they don 't lend money, so they shouldn't be a victim of the credit crunch. Even if they went bankrupt, I don't see how that would affect my account. Now if the thousands of companies and governments whose stocks and bonds I'm invested in (via mutual funds) go bankrupt all at the same time, then I'm in trouble.

[Captain Angry]

7. Yep.

I didn't mean to be rude to the person I replied to, but telling people to cash out is the worst advice possible.

I just don't want people to make rash decisions when there are thousands of financial advisers who can explain it all very nicely.

If a client is petrified about the market, there are safe places to be. But cash in the mattress isn't any of those places.

[girl gone mad]

4. If you have over 100K in Washington Mutual,

or if you can't afford to wait on payment from the FDIC, get it out ASAP.

Make sure you have FDIC protection for all of your CDs or accounts.

[coffeenap]

2. What is the status of credit unions? Secure? Not?

Thanks.

[Warpy]

5. More than you'd think

http://ml-implode.com/

I'd be very cautious about investing in the financial sector until all this stuff has shaken out.

[harry123]

8. I'd be cautious about financials as well

They are way up today but you're right to be cautious.

Laszlo Birinyi says avoid them.

http://www.bloomberg.com/apps/news?pid=newsarchive&sid=azQRBmOPLmyA

Also, I have a new bankrupt global financial institutions list I have started in addition to my writedowns list.

http://www.creditwritedowns.com/2008/07/bankrupt-global-financial-institutions.html

Last thing is the horrible stories on IndyMac. You have to feel sorry for the depositors:

http://www.latimes.com/news/printedition/front/la-fi-indymac16-2008jul16,0,5489094.story