After IndyMac, are other banks at risk?

Worried customers with deposits in excess of insured limits flooded IndyMac Bank branches Monday, demanding to withdraw as much money as they could or get answers about the fate of their funds.

The crowd swelled outside the bank's headquarters branch in Pasadena, Calif., throughout the day. Many waited for hours to get inside what became IndyMac Federal Bank after its takeover Friday by the Federal Deposit Insurance Corp. The bank has 33 branches in Southern California.

"I didn't think this could happen," said Charles Tengeri, a retired schoolteacher who emerged from the bank with a check for $171,000 — an amount he said represented most of his savings. "I'm glad to get anything out," he said.

FDIC spokesman David Barr, who was stationed outside IndyMac headquarters, said it could take several years before the agency fully addresses customer claims.

The government's seizure of IndyMac raises concerns for many consumers about whether their banks might be next.

Here are some questions and answers about the government's role when a bank fails and if other banks are at risk:

Q: Why did the government seize IndyMac's assets?

A: Regulators closed IndyMac after customers began a run on the lender following the June 26 release of a letter by Sen. Charles Schumer, D-N.Y., urging several bank regulatory agencies that they take steps to prevent IndyMac's collapse. In the 11 days that followed the letter's release, depositors took out more than $1.3 billion, regulators said.

Q: What happens when the government takes over a bank?

A: In such a scenario, called a conservatorship, a bank's regulator takes control of the company and oversees its operations. The move is to maximize the value of the institution for a future sale and to maintain banking services in the communities formerly served by the bank.

Q: Is my bank at risk?

A: John Bovenzi, the former chief operating officer of the FDIC put in charge of IndyMac, reassured consumers late Sunday that bank failures have been rare in the past, and that if more banks do fail, the government has enough in reserve. According to regulatory policy, no advance notice is given to the public before a bank's assets are seized by federal regulators.

According to the FDIC, IndyMac is the fifth U.S. bank or thrift that has failed this year. In 2007, only three financial institutions failed, a small number when compared to the 2,808 institutions that failed between 1982 and 1992.

Q: How can I make sure my money is safe?

A: All deposit accounts worth $100,000 and less are automatically insured by the FDIC. Many retirement accounts, such as IRAs and 401(k)s, are insured to $250,000 per person. But since it's a person's aggregate deposits, and not their individual accounts, that are insured, any amounts over $100,000 deposited at any one bank are not covered.

In a joint account, each depositor is insured up to $100,000.

The FDIC has information about its insurance on its Web site, at http://www.fdic.gov/deposit/deposits/insured/yid.pdf.

Q: How much money does the FDIC have?

A: The FDIC has nearly $53 billion in insurance funds. Beyond that figure, Bovenzi said the FDIC would have to go to other banks to raise more money, adding that in such a case, consumers could expect to see some of that amount passed on to them in the form of higher fees. The current estimated loss to the FDIC resulting from IndyMac's failure is between $4 billion and $8 billion.

Q: Do banks have to pay into the FDIC's deposit insurance fund?

A: Yes. The total amount depends upon the assessment rate assigned to the institution and the size of their assessment base — which is roughly equal to an institution's total domestic deposits. Assessment rates are assigned to institutions based upon the risk they pose to the fund and currently range from 0.05 percent to 0.43 percent. Almost 94 percent of institutions pay between 0.05 percent and 0.07 percent.