Letter to Senator from Fellow Depositor Keith Brown

Copy of letter sent to Pa Senator Robert Casey, PA Senator Arlen Spector and Rep Todd Platts, Senator Grassley regarding IndyMac failure by Keith Brown


February 20, 2009

I am a retired person who unfortunately had funds in excess of the FDIC insured limits in CDs at Indymac Bank at the time of its collapse at subsequent takeover on July 11, 2008.

It appears at this time that my loss will be $ 74,980 and that no further FDIC payout will be made as a result of the recent sale to IMB Management Holdings. The FDIC website states “uninsured deposits will likely remain liabilities that will not be reimbursed.”

To add insult to injury, the proposed FDIC's model is to limit the intended buyer of IndyMac’s potential losses by promising to cover almost all losses in excess of 20 percent of the portfolio in exchange that the buyer be required to offer mortgage modifications to IndyMac customers on terms specified by the FDIC, and fails to adequately consider the consumer protections inherently afforded by the agency in it’s role as receiver under federal law. At the present time, there is insufficient evidence that the FDIC has included uninsured depositor interests as part of the intended IndyMac sale. So, it appears to me that the Buyer, at great discount, bought the failed bank and is additionally protected by the FDIC for a great percentage of any losses on loan modifications, yet I as a depositor have been forgotten with little hope of reimbursement for a large part of my retirement savings. I feel like I and my fellow depositors were “sold out” in order to make a quick sale, clear the books of the FDIC who were in first position, and it smells funny that such a deal was cut for some Wall Street money men.

This news story from is revealing; Feb. 19 (Bloomberg) -- J. Christopher Flowers, whose private-equity firm bought a stake in California’s failed IndyMac Bank, said “low-life grave dancers like me” stand to make “a tremendous fortune” from the financial crisis.

Some of the best opportunities will be in the purchase of assets from governments that were forced to seize failing financial institutions, Flowers, 51, said during a panel discussion in New York today. His “grave dancer” remark drew laughs at the event, sponsored by Source Communications.

It appears that Mr. Flowers and his partners have taken advantage of the FDIC at Depositors’ expense.

Furthermore, there is evidence of Gross Regulatory Malfeasance by the Office of Thrift Supervision. The Treasury Department's Inspector General’s reported that a senior official of the Office of Thrift Supervision (OTS) knowingly allowed IndyMac to conceal the depth of its financial problems only weeks before it failed by falsifying a key financial filing. IndyMac was allowed to record capital contributions in an earlier period than received, but that the “circumstances and accounting of this transaction as described by OTS are unclear and the documentation by OTS was ambiguous and incomplete.

And let’s not forget that Senator Charles Schumer caused the “run on the bank” by publicly releasing a letter that was critical of the OTS in regulating Indymac. His charges were likely on the mark, but the fact he went public with them prevented an orderly resolution and created a disaster for me and many others - irresponsible and bad judgment in my opinion..

Within two months of Indymac’s failure, FDIC raised its deposit insurance coverage from $100,000 to $250,000 per depositor, too late to help me and 10,000 other Indymac depositors. But as previously stated, the FDIC is willing to help insure the Buyer’s losses (but presumably will not share in any profits that could help offset depositor losses) Perhaps the FDIC should be asked a few questions about this arrangement.

It appears from my research that I will be limited in the losses that I may deduct on my Federal Tax Return. The lost funds had been taxed when I earned the money prior to investing in several CDs, I paid tax on the interest earned on the CDs each year, and now that I have suffered the loss, I am not permitted to deduct the entire loss for income tax purposes. Quite a system we have…

To summarize, an irresponsible Senator caused a run on the bank, the OTS did not properly enforce its regulations and demonstrated malfeasance, the regulator who specifically allowed the falsification (and had done so previously at another bank) has been placed on administrative duty and presumably continues his salary, the Buyer of the failed bank gets an FDIC guaranteed deal against their losses without regard to depositor losses, there is no retroactive increased insurance coverage limits for me and other depositors, and I cannot deduct my losses on deposits on which I had already paid taxes.

I have worked for over forty years, owned my own business for several years, tried to live in a financially responsible way, paid my taxes as a responsible citizen and have learned the harsh reality of incompetent and irresponsible government action (or lack thereof)

I am now asking for some relief to restore my lost retirement funds.

I ask that you consider action to retroactively apply the $250,000 FDIC insured limit to July, 2008, the event that caused the FDIC and US Government to increase limits.

Although the Indymac investigation for fraud has likely diminished or ended since the sale by FDIC, I ask that the investigation continue, since there should be punishment for any perpetrators and I believe that tax deductibility improves if the loss is a result of theft or fraud.

Increase oversight and enforcement of regulations for financial institutions in the future so that others may not have to suffer loss of their hard earned money.

At least change the tax code to allow dollar for dollar loss of deposits in failed banks, regardless of percentage adjusted gross income or AMT considerations. Also, please consider allowing capital loss carryover greater than $3,000 per year. At my age, I may not live long enough to deduct those losses on future returns.

Thank you for listening to a disappointed, angry and frustrated citizen.
Sincerely,

Keith Brown