Before its failure, IndyMac Bank was the largest savings and loan association in the Los Angeles area and the seventh largest mortgage originator in the U.S. It was heavily involved in Alt-A mortgages and reverse mortgages, which in part resulted in its dramatic rise.
But in the early 2000s, investors started looking for riskier loans for which borrowers would pay a higher interest rates, a strategy that resulted in rapid growth and a high concentration of risky assets.
During 2006, IndyMac originated over $90 billion of mortgages. The company often made loans without verification of the borrower's income or assets, and to borrowers with poor credit histories.
Eventually, IndyMac's actions caught up with the company and resulted in something of a bank run after New York Senator Chuck Schumer warned the public about the bank's risks. IndyMac depositors, fearing the worst, withdrew about 7.5% of deposits from IndyMac, and customers formed long lines outside IndyMac locations trying to withdraw their cash.
On July 11, 2008, the FDIC put the assets up for auction and the bulk of the business was sold to IMB HoldCo LLC.
Only six banks had failed in the year before IndyMac collapsed. In the year that followed, more than 10 times that many went under. By July 2011, more than 300 additional banks had failed, a rate of two per week. Rare was the Friday evening when regulators weren't seizing control of one more.
With $32 billion in assets, IndyMac Bank is one of the largest bank failures in American history.
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