IndyMac Failure Demonstrates That The FDIC's Customer Service Skills Could Use Some Work

We’re always told not to worry about our bank failing because our deposits are insured up to $100,000 by the FDIC. Well, in case you were wondering what happens when a bank actually does fail, look no further than the great state of California, where IndyMac has been taken over by federal regulators and its customers are getting a taste of all the FDIC has to offer.

We’re hearing reports of customers being kept outside of the banks for ours, forced to line up in the sweltering heat, and being threatened with arrest if they get upset about it.

From the L.A. Times “L.A. Land” Blog:

For the third day in a row, the federal government this morning appeared unprepared to deal with bank customers who simply want their money. Frazzled, anxious and angry Californians — many of them elderly — are waiting on blazing sidewalks for the third day in a row, while security guards block the doors to the bank’s branches. An elderly woman fainted while waiting in line in Pasadena. Depositors were threatened with arrest yesterday in Encino. This is how the government treats its customers?

In exactly which manual of customer service does it say the following: When your customers arrive at your place of business, do not open the doors and invite them inside. Instead, guard the doors and tell your customers to wait for hours in the sweltering heat outside. If they grow restless, threaten them with arrest.

Good work, FDIC.

The IndyMac fiasco: a three-day run of federal incompetence [LA Times]
(AP Photo/Nick Ut)

Comments

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  1. B says:

    They could use some George Bailey.

  2. Silversmok3 says:

    Well,if folks arent happy they can wish for the good old days where the last man in the run didn’t get his money.

    Methinks the whole fiasco is caused by ignorant people who don’t read history. Id rather roast in a 2 hour line than not get a penny at all.

  3. Charybdis says:

    We’re hearing reports of customers being kept outside of the banks for ours…

    Being kept outside for your what?

  4. ConsumptionJunkie says:

    The FDIC insures deposits up to $100,000. Past that you’re out of luck.

  5. DMXParsons says:

    Remember this story the next time someone suggests that a particular industry is so badly managed that the government should step in and run it.

  6. ionerox says:

    Why on earth would the FDIC have customer service teams? They probably spend a lot of time sacrificing goats to some obscure god in hopes that they don’t have to go in and take over a bank that’s going down the tubes. I’m pretty sure that any CS training they do is outsourced to FEMA.

  7. oldtaku says:

    > This is how the government treats its customers?

    Errr, yeah? Pretty much always. We don’t care. We don’t have to. We’re the government. (Thanks Lily).

  8. ironchef says:

    @DMXParsons: if it was up to good old private enterprise, all those people would be out of luck completely.

  9. petrarch1611 says:

    too big too fail

  10. UTnick says:

    if anyone wants — you can still open and IndyMac account online. great rates.

  11. MrMold says:

    Funny how the person IDd as FDIC looks like a Republican political appointee. One who knows that government is the problem and free markets are best. All Praise to Saint Ronald of Reagan.

  12. Bizdady says:

    I thought I read somewhere the FDIC was going to cover up to %50 more than the usual %100,000

  13. Bizdady says:

    err 50% more than the usual $100,000

  14. I don’t understand these customers, the bank already failed. If you had more then the FDIC limits your going to loose all or some of it. Standing outside of a bank isn’t going to make a difference.

    You will get all of your money that’s within the FDIC limits, so again waiting on line isn’t going to make a difference.

  15. huadpe says:

    @hypochondriac: It can make a difference. If you need the money right away, for example. Consider the number of withdrawal transactions on any given day for even a small bank. Now consider that maybe 1 in 5 of them is for an urgent expense (bill payment due, car repair to get to work, anything else time sensitive). If you need the money now, then yes, it makes a difference whether or not you get it now or 2 weeks from now. So they wait in line. Although, from what I understand, you can use ATMs still with their cards, so that would be advisable if you’re a former customer.

  16. jacksonwhole says:

    @hypochondriac: Did you ever think that the money in the bank might be all they have? Like for daily needs? How are they to get by over the next few days, few weeks, few months with NO cash? Some people prefer not to use credit cards, or do not have them.

  17. Tmoney02 says:

    @Bizdady: @Bizdady: They are going to try but it is not a guarantee. The FDIC guarantees 100K by using tax payer money. They then sell off all assets of the bank and the money they raise goes back to those people who had accounts greater than 100K.

  18. jamesshieh88 says:

    I was in line at the Monterey Park branch yesterday morning until 6 at night. The situation at my branch was quite calm. The FDIC agents there were willing to work with customers in answering questions and addressing any concerns that they may have. The bank even provided chairs and water for customers that were still waiting outside. This is one of the only banks I know of where the relationship between the teller and customer isn’t restricted by a piece of glass in between.

  19. Orv says:

    @Silversmok3: Yeah, isn’t the whole point of the FDIC that your money is ensured, so you don’t have to wait in line in the hopes of getting some before it’s all gone?

    Methinks the problem here is unnecessary panic on the part of the public, not the FDIC’s customer service skills.

  20. @Orv: So, the FDIC has great customer service skills? What part of “they made the elderly stand out in the sun for hours and threatened people with arrest” did you miss?

  21. P41 says:

    Lets see, people with ATM cards can use them as normal. People can write checks as normal. I pity anyone who thought IndyMac was solid enough to have more than $100k cash in. People with less than $100k will get every penny. The FDIC has many times what they need in cash, no tax dollars involved at IndyMac. Maybe the headline should be Confused people with nothing to worry about are distracting new bank officers trying to catch the crooks who caused the problem.

    Oh yeah, every one of those people is on social security, that’s the only money they have in the world, there’s no chance of any more before they starve, they don’t use those newfangled “checks” so they have to walk to the bank every other day to withdraw grocery money from those nice people at the counter. Ok, maybe the FDIC should make a special line just to help those people. But come on, imagine the government took over a crappy hospital and people are swamping the ER trying to get their papercuts looked at before it gets serious.

    Could I have your attention. Everyone with more than $100k at this bank, go home, it’s too late to do anything that matters, anyway we’re not letting you walk out with $100k in cash in this neighborhood. Everyone with less than $100k at this bank, if you need new checks or your atm card doesn’t work, get in this line. Everyone else go to the atm around the corner and stop this nonsense.

  22. I would expect the bank to have the same volume it normally does. I don’t understand why so many people want to withdraw money now. They had to have been informed that it’s safe.

  23. My Iron Lung is Rusted says:

    Heck of a job, Bairie.

    (As in Sheila Bair, FDIC Chairman. How’s that for a reach?)

  24. Kevino says:

    Well, at least we know the government trains all of their employee’s at the same place for customer service since they’re all very poor at it.

  25. drewhaa says:

    Let’s clarify here… The FDIC does not directly use taxpayer money to insure deposits. Financial institutions pay for this deposit insurance based on perceived risk (through bank examinations) and asset size. So, we indirectly pay for the insurance through bank profits but not directly through taxpayer money. See the way too technical explanation here: [www.fdic.gov]

    Of course if too many banks fail and the FDIC’s Deposit Insurance Fund doesn’t cover the losses after banks are liquidated, then the Federal government steps in.

    I think it’s also important to note here that the FDIC is fully self-funded through insurance premiums. No direct taxpayer money is used to pay their employees.

    It’s also important to note that a lot of the FDIC employees handling this bank closure don’t normally handle such situations. They normally examine banks and deal with bankers, not directly with customers. This doesn’t excuse rude or incompetent behavior, but for a lot of them this isn’t their primary duty.

  26. jeetsta says:

    From what I understand, the first $100k was insured, but the government was offering 50% on any amount after that, first come first serve.

    Hence, the rush.

  27. QuantumRiff says:

    @P41: I’ve been wondering two things about this lately.. If you have an account with $150,000 in it, can’t you just write a check to another bank for that amount? What happens then?

    Second, how long has the 100,000 limit been around? Thats the limit for as long back as I can remember, and I wonder if that should be adjusted a bit for inflation…

  28. rbcat says:

    @QuantumRiff: From the FDIC’s information page:

    Checks that were drawn on IndyMac Bank that did not clear before the institution closed [such as a check you wrote after Thursday, July 10, IndyMac's last day as an independent bank -rbcat] will be honored up to your available balance or the insured amount.

    So, no, you can’t just write a check for $150k and have it clear. It will clear for $100k and nothing more. You have to file a claim to receive any portion of uninsured funds available after the bank’s assets have been sold. See here.

    The $100,000 limit was set in 1980, up from the previous limit of $40,000. People with over $100,000 in cash/cash-equivalent assets can participate in programs such as CDARS to help spread the deposits around, or simply open accounts at multiple institutions. (Each person is insured for $100,000 per institution)

  29. bryanarr says:

    The government sucks at CS? Surprise, surprise? You get your 100k if you had that much and 50cents to the dollar–sucks, but that’s life.

  30. @Silversmok3:

    It’s your own inability to confront problems that causes you to dismiss other people’s misfortune, since you don’t know how to deal with anything yourself. Solution for life’s problems: STFU, because that’s what I do.

    And it’s people like you who always go batshit apoplectic when it is THEIR money or something that is effecting THEM. Every. Single. Time.

    Probably the most insane example of blaming the victim I have ever read:

    Elderly people, who did nothing wrong in the slightest, should be happy they will get their money at all?

    What the fuck is wrong wi

  31. rlee says:

    @Bizdady: According the NPR interview with the head of FDIC this morning, customers actually get back most of the amount over $100K, but some of that won’t be immediate.

  32. domo-arigato says:

    I certainly don’t know many (if any) regular people with $100K in the bank. These people must be pretty uninformed to stand in line all day WHEN THEY DON’T HAVE TO. If people would just listen instead of panicking! Don’t these dumbasses understand that they’re making the problem worse?

  33. Jesse says:

    @rlee:

    It could take years and it’s not guaranteed that the uninsured amount will be fully recovered.

  34. xkevin says:

    @Tmoney02: Member banks pay premiums for deposit insurance. These premiums make up the fund, not tax payer revenue. In the loosest sense tax payers fund the reserve accounts through U.S Treasury securities, which the FDIC invests in. But in general, tax payers are not footing the bill.

  35. Average_Joe says:

    How do they normally split the bank assets to those that had more than 200k? Does it go back to the consumers first come first serve or is it divided equally? If it is first come first server, people waiting in line makes sense. But if it is divided equally the only people waiting in line should be people needing to make a withdraw for the day. The rest should wait a week or two when the line dies down. And if you had over 100k, you can first afford a lawyer. Go talk to someone and look at your legal options. The first to find someone with money to sue, such as the CEO or Schumer, will probably have the best chance at getting their money back.

  36. parrotuya says:

    It looks like we have good old-fashioned bank-run! Bring on the Hoover-villes..err..I mean Bush-villes!

  37. The_Gas_Man says:

    This LA Times blog isn’t telling the whole story. They’re using the guards to only allow a few people into the bank at a time so they can maintain peace and order; that’s a necessary thing to do. They haven’t barred the doors. If nobody was allowed in, they wouldn’t need the double guards there at the door, and there would be no single file line wrapping around the block (with the people in the front sitting down on benches, no less). And as is usually the case, it’s more than likely than these people who have been arrested did something to deserve it.

    It’s true that there is a bad situation going on there, but let’s not cloud things up with anecdotal stories and a biased (and ignorant) analysis.

  38. snowburnt says:

    The FDIC isn’t the government is it? or did I just hear that from my conspiracy theorist friend?…

  39. Shadowman615 says:

    @Silversmok3: Dude, seriously, wtf does that have to do with anything? So what if it was even worse in the pre-fdic days. That doesn’t mean everyone should have to bend over and take whatever gets dished at them.

    Sure, everyone would rather roast in a several-hour line than not get paid a penny. But there’s no law that says it’s supposed to be only one or the other.

    “Hey, if you folks don’t quiet down in that like, I’m turning this bank around and driving home. Remember, there are starving kids in Africa who would love to be fainting out here.”

  40. Luden says:

    Against popular belief, the FDIC may cover over $100,000 depending on the type of account and their owner/beneficiary. For example IRA accounts are covered up to $250k. I would highly suggest that anyone who keeps more then 100k in the bank to use the FDIC’s insurance calculator here: [www.fdic.gov]

  41. dangermike says:

    A little bit of perspective on the situation:

    Since 2001, there have been 30 bank failures covered by the FDIC. The total assets covered, discluding Indymac, come to approximately $8 billion. Indymac ALONE has approximately $32 billion in insured deposits. So in this one bank failure, the FDIC has to handle and disseminate roughly 4 times as much as it has in the past 7 1/2 years. They are in the midst of a massive undertaking that will simply take time to complete. The threats to arrest people stemmed from a very specific incident involving people trying to skip the line and the fight that broke out in response. The lines extend outside the banks because there are simply too many people to allow them all inside. They’re waiting in line for hours because it takes time to process all the withdrawals and account closures. It’s absolutely ridiculous to claim it’s being handled poorly. What’s important is that it IS being handled. There is not much more to hope for than that. It really doesn’t sound much worse than the DMV. Or even the post office, for that matter.

  42. rlee says:

    @Jesse: I wasn’t claiming otherwise. I believe she said that typically something like 40% of the uninsured amount is provided (almost?) immediately, and another 40% later. She wasn’t specific on the time frame.

  43. stinerman says:

    @P41:
    I pity anyone who thought IndyMac was solid enough to have more than $100k cash in

    I sure as hell don’t. Putting more than the FDIC max in a single bank is ridiculously stupid. And anyone rich enough to have more than $100,000 just laying around doesn’t get my sympathy anyway. The exception to that is if the savings are for retirement, but then I’m still calling them out on being stupid because they always could have opened an IRA, which has higher FDIC limits.

  44. lemur says:

    I am intrigued about the meaning of that FDIC guy’s raised hand in the picture. In the interest of decoding the FDIC’s customer service, here are some possibilities:

    1. He’s hoping for a high-five.
    2. “I am your god and thou shall kneel before me.”
    3. He’s about to pat a disgruntled customer on the head.
    4. “You need to be *this* tall to be allowed into the bank.”
    5. He’s doing the Nazi salute.
    6. “Let’s review body parts while you wait in the sweltering sun. This… is a hand…. a haaaaand.”

  45. Squeezer99 says:

    and this is the same government you want to run your healthcare?

  46. JustThatGuy3 says:

    @Squeezer99:

    Well, for one thing, they ARE letting people in the door eventually. Not true for a lot of people for healthcare today.

    And yes, I think the FDIC is a good example of something gov’t does that works very well.

  47. Grabraham says:

    I am not sure about other states but if you live in MA and your bank is a member of DIF your deposits are fully covered-
    “We are a member of both the Federal Deposit Insurance Corporation (FDIC), which insures depositors up to $100,000 and as a Massachusetts chartered savings bank, we are also members of the Depositors Insurance Fund (DIF), which insures all deposits and interest not covered by the FDIC, without limit, without exception.”

  48. mmstk101 says:

    “When your customers arrive at your place of business, do not open the doors and invite them inside. Instead, guard the doors and tell your customers to wait for hours in the sweltering heat outside. If they grow restless, threaten them with arrest.”

    If it had included “threaten them with arrest if they don’t show their receipt”, I’d say it sounds a lot like WalMart.

  49. Wormfather is Wormfather says:

    I wonder how many people in that line thought they were getting an iPhone?

  50. bonzombiekitty says:

    @Bizdady: From what I heard on the radio from an FDIC rep, the FDIC will fully insure up to $100,000. After that, they’ll return 50% of the remaining. Once all the banks assets are sold off, etc, the FDIC will then use that money to reimburse as much of the remaining difference as it can. According to the FDIC guy, on average, depositors with more than $100,000 receive 80% of the amount over $100,000.

  51. bonzombiekitty says:

    As per the OP, really, what do you expect the FDIC to do? A bunch of people are clamoring to get their money out of the bank. What do you want them to do? Let all the customers barge in a giant mob and fight each other to get to a teller just so they don’t have to stand outside?

    A lot of people are trying to use a limited resource at the same time. Of course there’s going to be a long line. You can’t safely fit them all in the bank at the same time, so where do you expect them all to wait? They’re going to have to wait outside.

    Guards blocking the doors? Gee I wonder why. There’s a bunch of people, some of them stressed and possibly frantic, trying to get in. What do you expect them to do? Just let them all try and squeeze themselves into the bank?

    This just seems like silly criticism to me. From looking at the video I’ve seen on TV, it more or less seems to be handled in a very orderly fashion.

  52. dragonvpm says:

    This doesn’t sound like federal incompetence (yet). A lot of people want their money and they all want it at once so it takes time to properly close out accounts and document everything. I wouldn’t be thrilled to have to stand in those lines, but I suspect most of those “anxious and angry” customers were already feeling none too thrilled when they got up Monday morning.

    It’s kind of strange really. No one seems to shocked to have to stand in line for an iPhone or any other popular product, but “Oh noes, we have to stand in line to get our money at the bank the FDIC took over!”

    I can totally sympathize with folks who really need to get their money ASAP, but once you have hundreds of people converging on any given branch, I don’t see how you could be surprised if long lines formed. Factor in people who have strange/non-standard situations (and therefore might eat up some extra time) plus the learning curve for the people working there (if they’re bank employees they’d need to learn how to do things the way the FDIC wants, if they’re FDIC employees they’d need to familiarize themselves with the bank) and it’s really not surprising just given the sheer volume of people and money involved.

    The blog that this article points to seems sensationalist at best.

  53. Cerb says:

    Well, why should the government be prepared to have good CS? The FDIC isn’t there to make sure you have a great banking experience, it’s to make sure you get your money when a bank goes belly up.

  54. xwildebeestx says:

    Yeah, I can’t imagine why mobs of angry and frantic people would cause a bank to station guards outside and enforce limits on how many people can come in at a time. It’s not like each of these people are walking out with what could potentially amount to $100K each in cash and the bank would like to make sure they at least make it to the parking lot alive.

    Seriously, people trample and kill other people on Black Friday for cheap DVD players, computers and video games. I’m surprised the bank customers didn’t comed armed (if this would have happened in Arizona instead of California, they probably would have).

  55. chenry says:

    I’m glad I keep my money in a safe buried on my shed.

    Did I say shed, I meant “in a bank and not in a safe under my shed”.

  56. lonebannana says:

    Heh heh… I wish i had to worry about losing more than $100,000 in my bank account.

    I wish I HAD $100,000 in my bank account…

    hell, $10,000….

    WELL CRAP! I wish I had some damn MONEY left over from the previous MONTH!

    Gotta go… have to get back to &%$#@ work….

    i will be sure to shed some tears for those guys…

  57. lordargent says:

    Haven’t these people heard of electronic transfers?

    /unless they disabled transfers

    /has accounts at 3 different banks

  58. ShreeThunderbird says:

    I once took a financial class in which the instructor claimed the
    F.D.I.C. had 10 years in to pay out on insured funds. At the current
    rate of inflation a customer’s $100,000.00 might be worth $100.00.
    Good deal for the F.D.I.C.

  59. woohhaa says:

    That’s why I trade in all my cash for gold and keep it in a small bag around my rottweilers collar. You laugh at me now, but we’ll see who’s laughing when you are burning your worthless bills to keep warm.