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Other Banks Not Eager to Accept IndyMac Checks, Customers Complain

FBI said to open investigation of IndyMac, Countrywide, other mortgage lenders

July 17, 2008

Customers lined up outside IndyMac branches when the bank, now officially called IndyMac Federal, reopened under federal control Monday morning. Even though their deposits were insured by the Federal Deposit Insurance Corporation (FDIC), many depositors apparently were in no mood to take chances and wanted to withdraw their money immediately.

Besides the long lines and occasional confusion inside the busy branches, many customers found that other banks were being cautious about accepting cashier's checks from IndyMac.

One consumer told The Los Angeles Times that a manager at Washington Mutual told her the bank had a "new policy" and it would be eight weeks or more before the full amount of transfers from IndyMac would be accessible.

But IndyMac is now controlled by the federal government, the consumer protested. The WaMu manager was unmoved.

Other bankers in the Los Angeles area said they were also being cautious with large deposits from IndyMac. It's not that they don't trust the FDIC, one banker said, but the chaotic situation surrounding IndyMac's failure opens the door to scam artists who may try to pass forged IndyMac cashier's checks, the banker said.

Most banks routinely put "holds" on amounts exceeding $5,000 unless the customer has a long and sterling record and ample asssets to cover the deposit if it later turns out to be contested.

Thus, a customer who showed up with a $100,000 check from cashing in an IndyMac certificate of deposit may find that only $5,000 of that amount will be available for days, weeks or even longer.

FDIC officials expressed concern and said banks should not be placing excessive holds on IndyMac Federal checks.

John Bovenzi, the FDIC official in charge of IndyMac Federal told the Times he had contacted several other banks in the area to express his concern.

FBI

The FBI, meanwhile, is said to be examining IndyMac's failure as part of a probe of at least 21 banks and other mortgage lenders.

Countrywide Financial, once IndyMac's corporate parent, is said to be one of the other institutions under FBI scrutiny. The bureau is reportedly probing accounting fraud, insider trading and the "securitization" of mortgage-backed securities.

Countrywide has since been acquired by Bank of America.

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