Bank customers cash out

GLENDALE — Hundreds of discontented IndyMac Bank customers, some who had waited in line since 4 a.m., withdrew funds from the troubled financial institution on Monday, three days after federal officials seized the bank as it teetered on the edge of collapse.

The federal Office of Thrift Supervision on Friday closed the $32-billion IndyMac, headquartered in Pasadena, and transferred day-to-day management to the Federal Deposit Insurance Corp.

Federal officials said IndyMac — which has locations in Burbank and Glendale — fell victim to a turbulent economy, characterized in part by plummeting housing prices and skyrocketing fuel costs.

Since New York Rep. Charles Schumer wrote to federal officials on June 26 of his concern that IndyMac was no longer viable — and news of the bank’s impending collapse gathered traction — depositors withdrew more than $1.3 billion from their accounts, and the bank’s stock plummeted more than 84%, officials said.

IndyMac, which has 33 locations in California, is the largest bank in the state to have been taken over by regulators and the second-largest financial institution ever to close in U.S. history.

Nearly 200 people waited outside IndyMac’s Burbank location on Monday morning, and another 30 people lined the sidewalk at the bank’s Glendale office.

Most people were hoping to withdraw funds that they will then deposit in more stable banks or cash out and wait for the dust to settle.

“I got my money out,” said Frank Brunes, who had been outside Burbank’s IndyMac branch since 4 a.m. “I’m going to cash it right now.”

The large crowds at IndyMac locations in California prompted the FDIC to ask local police officers to patrol the grounds. The officers were tasked with calming an angry crowd as well as ensuring that nearby businesses were not hampered.

Burbank police Sgt. Matthew Ferguson said the swarm of customers on Monday morning at the Burbank IndyMac was relatively calm, though anger directed at bank officials was palpable.

“The bottom line is the CEO is responsible. Why aren’t they in jail?” Burbank resident Peter Angles said as he waited to withdraw funds.

Angles said he lost $80,000 on the heels of Enron’s 2001 collapse and, as a result, has soured on financial institutions and their leaders. Nevertheless, he was confident IndyMac would not fall.

“You never think it’s going to happen here, but the reality is it hit home,” he said. “And home is now in Burbank.”

Because IndyMac specializes in mortgage loans and personal customer banking, Glendale and Burbank did not use the bank as its primary financial institution, officials said.

“The city doesn’t have any business relationship in the form of financing or banking with IndyMac,” Glendale City Treasurer Ron Borucki said.

Glendale does most of its banking with Bank of America and, should that institution collapse — a scenario that seems highly unlikely — city funds would be protected, Borucki said.

According to state law, banks are required to provide cities with collateralization for every dollar invested, ensuring access to funds in case of financial collapse, he said.

Federal officials sought to ensure customers their money would be protected after the government seizure.

The FDIC said they will fully return accounts of up to $100,000, although accounts of more than $100,000 will be reviewed by officials. Customers may be able to recover funds if they are not able to withdraw their entire account, officials said.

Many people at the Burbank and Glendale locations on Monday said their accounts totaled less than $100,000, but that did not stop most of them from withdrawing funds .

“I’ve got my whole life savings in there,” said John Sego, 84, at the bank’s Burbank location. “I need to get my money and close my account.”

A private investor will likely step in to purchase IndyMac and insure the funds already deposited throughout the institution’s locations, said Dave Fortune, a financial planner in Glendale.

“Unless you have more than $100,000, your money is safe,” Fortune said. “Most people don’t understand that.”

After withdrawing their money, many people headed for other financial institutions in the region.

Hoping to capitalize on the divestment, two Wells Fargo employees were standing outside of Burbank’s IndyMac branch. They declined to comment, but could be seen handing out cards and talking with potential customers.

But not everyone said they would be leaving IndyMac. Many were confident their funds would be secured by either the federal government or another entity that could soon begin running the bank.

“I’m not concerned,” Burbank resident Elena Cook said.

“I might leave it in there. I just want to get my questions answered.”