Two IndyMac customers lost unsecured deposits
In further proof that we’re back to the Great Depression again, everyone is talking about unsecured bank deposits. Basically, if you have less than $100K at an FDIC institution, you’re good to go. If you have more, you’ll need to spread the wealth at various institutions.
However what do you do if you’re a business and you have payrolls to pay? This story gets to why that’s a problem.
Fran Quittel, for instance, owns a small recruiting firm in Emeryville, Calif. She kept her business accounts at IndyMac Bank, including a checking account for receivables and for disbursing payroll, and a savings account.Thanks in part to the timing of the FDIC takeover — at that point, clients had deposited payments into her checking account but her payroll had not yet paid out, plus she was temporarily holding funds to pay into a 401(k) — Quittel lost thousands of dollars in uninsured deposits.Meanwhile, Andrea Bruno, a San Francisco-based marketing manager for a software company, faces a very different problem. Unrelated to the bank’s financial troubles, Bruno contacted IndyMac on Thursday, July 10 — the day before the FDIC took over — to close out a Certificate of Deposit that was about to roll over into a new term. Not eager to accept the low interest rate offered on the new CD, she faxed the bank requesting to close the account and have payment mailed to her.Upon hearing of the bank’s demise the next day, she figured her assets were safe, given the timing of her request. But on Monday, July 14, she checked her account online and found $14,500 had been shaved off the top.To my horror there it was with half the amount over $100,000,” Bruno said in a telephone interview. Her request had not been honored, and the bank had rolled the money into a new CD — minus half the amount that exceeded FDIC insurance. When she called the bank, customer representatives confirmed her fax was received before the bank failure, but no one seemed able or willing to help her recover her lost funds. The FDIC told her to call the Office of Thrift Supervision, the regulator in charge of handling the bank’s customer complaints before the FDIC took over IndyMac.
–Market Watch, 28 Jul 2008
No wonder people with unsecured deposits are quietly moving their money out of suspect financial institutions. The next thing you know, people will start stuffing their mattresses again.
The easiest thing for the FDIC to do for transparency is SOOO simple: just tell people when they go ‘over’ the $100K insured limit in any “one” or OR group of accounts that has ONE tax structure. Who couldn’t follow this simple alert? There is a letter to write at
http://www.fdicbusinessalert.com that would be particularly good for Senator Schumer and Sheila Bair in particular.
pro-transparency, you’re oh so right. But, obviously, it’s in the banks’ interests to have unsecured deposits, isn’t it? As you suggest, the only thing to make this happen is to regulate it into their reporting requirements.