IndyMac Failure Sparks Concerns

August 18, 2008
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GRAND RAPIDS — Consumer fears about the safety of their checking and savings deposit accounts were stirred following the recent failure of IndyMac Federal Bank, which the federal government took control of last month due to a massive run on deposits. Regulators reiterated at that time that deposits of up to $100,000 were safe and insured by the Federal Deposit Insurance Corp.  

The FDIC guarantees the safety of checking and savings deposit accounts, certificates of deposits and money market deposit accounts of member FDIC-insured banks. Deposits in commercial banks and thrifts are insured by the FDIC for up to $100,000 per depositor per insured bank and up to $250,000 per depositor per insured bank for retirement accounts. Banks, not customers, purchase the insurance: It’s automatic and it’s backed by the federal government. If an FDIC-insured bank fails, FDIC insurance covers the balance of a depositor’s account dollar-for-dollar up to the insurance limit, including the principal and interest accrued on an account up to the closing of the affected bank.

According to the FDIC, since its creation in 1933 there have been only two years without any bank failures — 2005 and 2006. There have been 3,500 bank failures in the country since 1934.

When news spread that federal regulators had siezed IndyMac, the Michigan Bankers Association began receiving calls from worried consumers. The MBA issued a press release a few days later, assuring consumers that their deposits in FDIC-insured banks were secure.

“Your money is safe in a Michigan bank,” stated Dennis Koons, the MBA president and CEO.

Throughout the FDIC’s 75-year history there have been no losses of insured deposits when a bank closed its doors, said MBA spokeswoman Gail Madziar. The MBA has been helping its member banks train their staff to answer questions, reassure customers and make sure they know the facts.

“What we’ve been doing is working with our banks to help them get the word out to the public and to their customers, especially about the FDIC insurance and how important it is that they not worry about their accounts because they are safely insured,” Madziar explained.

She said people who are extremely worried or have large deposits should go in and talk to their banker because the bank can structure their account so they are fully covered.

“The average consumer doesn’t have anything to worry about,” Madziar said. “Their banks and their deposits are fully insured and backed by the FDIC, and they’re not going to lose any money on that. No one has ever lost a penny on an FDIC-insured deposit. That’s what we’re trying to encourage people to understand.”

Comerica Bank personnel have been fielding numerous questions from retail bank customers since the news of the IndyMac bank failure. The failure of that bank certainly heightened customers’ awareness of the safety and soundness of their deposits, said Patti Griswold, senior vice president and regional manager for Comerica Bank branches in Grand Rapids, Holland and Muskegon. Griswold said she’s had more questions about FDIC in the last four weeks than she’s had in her 16 years in banking.

“The volume is expediential to what we typically receive, both from our own customers as well as from consumers calling in who are just looking for advice or looking to diversify the deposits they have at other institutions,” Griswold noted. 

Griswold said callers usually want to know about the deposit insurance coverage they have with their Comerica deposits and with the deposits they have in other institutions. They want to understand how they can maximize their coverage. “They’re looking for reassurance and advice,” she explained. “They basically want to make sure that they’ve got their deposits in a place they feel comfortable with.”

In response, Comerica put its banking center managers in charge of answering questions on FDIC issues.

“We felt it was extremely important that when customers come in or call in that they feel very comfortable that they are dealing with a competent, capable individual who can deliver the right information,” Griswold explained. “It’s really about being a trusted partner to the client at the time of inquiry.”

She said Comerica has “very quickly become very knowledgeable” on the FDIC Web site and the calculators that are available for use on that site. A person on the Comerica management team will sit down with a customer and walk them through the calculator, showing them the deposits they hold with Comerica, as well as other institutions, and what’s insured and what’s not insured.

The bank also identified the individual within the FDIC who is the specialist for trust deposits.

“Trusts can be very complex, and we were struggling with how to find the right information for clients that have more complex trusts,” Griswold explained. “We found someone who we’ve been able to, in a couple of situations, actually fax trust documents to that individual, who has reviewed them and helped us counsel back to that client on coverage.”

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