Regulators take over troubled U.S. mortgage lender

In this Jan. 15, 2008, file photo, an IndyMac branch office in Burbank, Calif., is seen. (Reed Saxon/Associated Press)Bank regulators seized California-based mortgage lender IndyMac Bancorp Inc. on Friday afternoon after panicky depositors began withdrawing their money, leaving the institution short on cash.

Financial regulators seized IndyMac's assets, fearing it might not be able to meet continued withdrawals by investors hit by the credit squeeze.

IndyMac customers with funds in the bank will be limited to taking out money over the weekend through automated teller machines, debit card transactions or cheques, regulators said.

The bank will reopen on Monday as IndyMac Federal Bank under the supervision of the Federal Deposit Insurance Corp., the FDIC said.

David Barr, a spokesperson for the FDIC , which insures deposits in American banks, said the insurance agency is trying to find a buyer for IndyMac.

"This bank is now being operated by the FDIC. The FDIC over the next 90 days or so will begin to market this bank to try to get it back into private hands. But until then, for customers, if you had less than $100,000, there's no change in business for you. It should be business as usual," he said.

Customers have withdrawn about $100 million since Senator Charles Schumer, a New York Democrat, wrote a series of letters in late June to regulators in Washington and California, asking them to take steps to prevent the bank's "likely collapse."

IndyMac is the second largest federally insured financial company to be seized by regulators. Its failure is expected to cost the FDIC anywhere between $4 billion and $8 billion US.

The bank, with assets of $32 billion and deposits of $19 billion, specialized in a type of mortgage that didn't require borrowers to provide documentation on their incomes.

IndyMac lost $184.2 million in the first quarter and announced on Monday that it was expecting a wider loss for the second quarter.

Its failure comes as shares in the country's two biggest mortgage providers, Fannie Mae and Freddie Mac, fell by 50 per cent on Friday. Share prices recovered after the chairman of the Senate banking committee said the companies have access to the capital they need.

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