IndyMac Bancorp Inc., once the second-largest U.S. independent mortgage lender, filed to liquidate its remaining assets three weeks after its bank was seized by U.S. regulators and put under other management.
IndyMac's liabilities are between $100 million and $500 million, according to the Chapter 7 filing by the bank holding company Thursday in U.S. Bankruptcy Court in Los Angeles. IndyMac said it has fewer than 50 creditors, including law and accounting firms and other banks, none of whose outstanding claims were listed.
IndyMac was seized by U.S. regulators July 11 with its $19 billion in deposits, after a run by depositors left the mortgage lender strapped for cash. The Federal Deposit Insurance Corp. is running a successor institution, IndyMac Federal Bank, and regulators have said they intend to sell the seized bank, adding that its high risk-lending and mortgage losses make it “unattractive.”
William Isaac, the FDIC chairman from 1981 to 1985, said the bankruptcy was expected and won't affect the bank's operations. “The bank was the major asset, so once the bank was seized, the fate of the parent company was probably sealed,” he said in a telephone interview.
IndyMac Federal Bank Chief Executive Officer John Bovenzi said in an e-mailed statement that “customers will continue to receive the same value and personal service” as they did before the holding company's bankruptcy. The newly created unit is backed by the FDIC's $53billion deposit insurance fund, which is further backed by “the full faith and credit of the U.S. government,” the FDIC said in an accompanying statement.
The FDIC “has been in sole possession custody and control of all of the books and records of” IndyMac Bancorp, and the court filing was made without access to information that bankruptcy laws typically require, Chief Executive Officer Michael Perry said in court papers.
While banks are prohibited from filing for U.S. bankruptcy protection, bank holding companies aren't. Perry is IndyMac Bancorp's sole remaining employee, according to the filing. The company has $50 million to $100 million in assets.
IndyMac Bancorp racked up almost $900 million in losses as home prices tumbled and foreclosures hit records. California ranked second among U.S. states, with one foreclosure filing for every 192 households in June, 2.6 times the national average.
IndyMac came under fire in June from U.S. Senator Charles Schumer, a New York Democrat, who said lax lending standards and deposits purchased from third parties left it on the brink of collapse. In the 11 business days after Schumer explained his concerns in a June 26 letter, depositors withdrew more than $1.3 billion, the Office of Thrift Supervision said.
IndyMac, with $32.01 billion in assets as of July 11, was the largest OTS-regulated savings and loan to fail and second-biggest financial institution to close, behind Continental Illinois in 1984, according to the FDIC. The failure will cost the federal deposit insurance program, which repays customers when a bank fails, about $4billion to $8 billion, the FDIC said in a statement last month.
The company is represented in the bankruptcy case by the law firm Alston & Bird LLP.
The company proposed that its first creditor meeting be held Aug. 28. Creditors listed in its petition include accounting firm Ernst & Young LLP, law firm Alston & Bird, and JPMorgan Chase & Co.