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IndyMac Goes National


90 other banks could be next.

Relax, the federal takeover of IndyMac Bancorp (IMB) isn't the end of the world.

Southern California's IndyMac, one of the nation's largest mortgage lenders, is the fifth bank to be taken over by the Federal Deposit Insurance Corporation (FDIC) this year. Overall, the banking system appears to be in less danger now than it was in the late 1980s and early 1990s when about 1,000 federally insured institutions failed in the savings-and-loan debacle.

"All bank depositors should understand that their insured deposits are safe," says Sheila Bair, chairman of the FDIC. "The chance that your own bank will be taken over by the FDIC is extremely remote. And if that does happen, you will continue to have virtually uninterrupted access to your insured deposits. No bank depositor has ever lost a penny of insured deposits."

The FDIC insures deposits at about 8,500 banks and thrifts; insurances ranges to $100,000 per institution, $250,000 on some retirement accounts. It has $53 billion to reimburse customers for deposits lost in bank failures.

IndyMac, a spin-off of Countrywide (CFC), was the largest American lender to fail in about 20 years; it'll require at least $4 billion, if not $8 billion, to cover depositors' losses. Bank of America (BAC) bought Countrywide this year in an all-stock deal valued at about $4 billion.

If you're a big saver, think about a CDARS account. The Certificate of Deposit Account Registry Service -- or CDARS, pronounced like the trees -- saves you from having to store your CDs at several banks in order to keep them below the $100,000 limit for full FDIC coverage.

Through the CDARS program, your funds are split into amounts below the FDIC limit and divided among member banks to ensure full coverage up to $50 million. You make deposits through a single member bank and receive one monthly statement - no need to run to different banks all over town.

Check the Promontory Interfinancial Network to find banks in your area that participate in the program. About 2,000 banks nationwide are active in the program. In general, the service is offered by regional banks: for example, Northrim Bank in Anchorage, Alaska; Fremont Bank in California and The Apple Bank for Savings in New York. Most large banks such as JP Morgan Chase (JPM), Wells Fargo (WFC) and Wachovia (WB) do not participate in CDARS.

Check the financial strength of your bank of Bauer Financial or Institutional Risk Analytics and compare CD rates at

The FDIC plans to reopen IndyMac's banking unit Monday, under the name IndyMac Federal Bank FSB. It hopes to sell IndyMac to a stronger bank within 90 days. Federal officials say IndyMac Federal Bank will cover all insured deposits and 50% of uninsured deposits, at least initially.

The FDIC seized IndyMac on Friday after customers withdrew $1.3 billion in 11 business days. The run on the bank followed the June 26 comments of Democratic Senator Charles Schumer of New York, which questioned the bank's prospects.

Some analysts say as many as 150 small and mid-size banks could fail over the next 12 to 18 months. In 1994, the FDIC said 575 banks were troubled; now, the FDIC's worried about only 90 banks. The key: Failed banks are a lagging indicator.

The market's developed a case of the jitters, however, as the Federal government prepares a bailout for Fannie Mae (FNM) and Freddie Mac (FRE) that some fear could lead to nationalization of the federally chartered private mortgage companies.
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