IndyMac Faces Bank "Run"

After announcing on Monday that it would shutter its mortgage lending operations but continue business as a retail bank, IndyMac was hit on Tuesday by a potentially fatal blow to that part of its business as well.

Bank depositors rushed to withdraw money from the bank, even though such deposits are insured up to $100,000 by the Federal Deposit Insurance Corporation and IndyMac stock fell even further to $0.44 per share.

The company had announced that it would be terminating about half of its 7,200 employees and it has sold most of its retail mortgage branches to Illinois-based Prospect Mortgage for an undisclosed price.

With the depositors' demand for their money many analysts were predicting a sale of the entire company or a bankruptcy.

In a filing with the Securities and Exchange Commission IndyMac blamed Senator Charles Schumer (D-NY) for contributing to depositor and investor concerns. Senator Schumer had sent letters to several regulatory agencies alleging that the company might fail. His comments prompted agencies to restrict IndyMac's borrowing ability which caused the company's operating liquidity to about $1.7 billion. Senator Schumer responded, saying that the company's business practices and poor supervision caused its problems.

Reports are unclear as to whether or not IndyMac was on the FDIC's Bank Watchlist.