Net Asset Value of Certain Gold and Silver Funds and Trusts

IndyMac Second Largest Failure - 10,000 Depositors Uninsured for $1 Billion

"Some 10,000 depositors had funds in excess of the insured limit, for a total of $1 billion in potentially uninsured funds," the FDIC said.

Government shuts down mortgage lender IndyMac
By Alex Veiga
Associated Press

IndyMac Bank's assets were seized by federal regulators on Friday after the mortgage lender succumbed to the pressures of tighter credit, tumbling home prices and rising foreclosures.

The bank is the largest regulated thrift to fail and the second largest financial institution to close in U.S. history, regulators said.

The Office of Thrift Supervision said it transferred IndyMac's operations to the Federal Deposit Insurance Corporation because it did not think the lender could meet its depositors' demands.

IndyMac customers with funds in the bank were limited to taking out money via automated teller machines over the weekend, debit card transactions or checks, regulators said.

Other bank services, such as online banking and phone banking were scheduled to be made available on Monday.

"This institution failed today due to a liquidity crisis," OTS Director John Reich said.

The lender's failure came the same day that financial markets plunged when investors tried to gauge whether the government would have to save mortgage giants Fannie Mae and Freddie Mac.

Shares of Fannie and Freddie dropped to 17-year lows before the stocks recovered somewhat. Wall Street is growing more convinced that the government will have to bail out the country's biggest mortgage financiers, whose failure could deal a tremendous blow to the already staggering economy.

The FDIC estimated that its takeover of IndyMac would cost between $4 billion and $8 billion.

IndyMac's collapse is second only to that of Continental Illinois National Bank, which had nearly $40 billion in assets when it failed in 1984, according to the FDIC.

News of the takeover distressed Alan Sands, who showed up at the company's headquarters in Pasadena, Calif., to find out when he could withdraw his funds.

"Hopefully the FDIC insurance will take care of it," said Sands, of El Monte, Calif. "I'm also kind of kicking myself for not taking care of this sooner, sooner as in the last couple of days."

A couple of dozen customers could be seen outside the building, reading fliers handed out by FDIC staff. The agency set up a toll-free number for bank customers to call.

IndyMac Bancorp Inc., the holding company for IndyMac Bank, has been struggling to raise capital as the housing slump deepens.

IndyMac had $32.01 billion in assets as of March 31.

A spokesman for the lender referred media queries to the FDIC.

The banking regulator said it 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.

In a statement Friday, Schumer said IndyMac's failure was due to long-standing practices by the bank, not recent events.

"If OTS had done its job as regulator and not let IndyMac's poor and loose lending practices continue, we wouldn't be where we are today," Schumer said. "Instead of pointing false fingers of blame, OTS should start doing its job to prevent future IndyMacs."

The FDIC planned to reopen the bank on Monday as IndyMac Federal Bank, FSB.

Deposits are insured up to $100,000 per depositor.

As of March 31, IndyMac had total deposits of $19.06 billion.

Some 10,000 depositors had funds in excess of the insured limit, for a total of $1 billion in potentially uninsured funds, the FDIC said.

Customers with uninsured deposits could begin making appointments to file a claim with the FDIC on Monday. The agency said it would pay unsecured depositors an advance dividend equal to half of the uninsured amount.

During a conference call with reporters, FDIC Chairman Sheila C. Bair said the agency would cover all insured deposits and then try to recover its costs by selling IndyMac's assets.

"We anticipate trying to market the institution as a whole bank," Bair said. "How much money we derive from that will depend on who gets paid what."

Holders of unsecured IndyMac debt may not fully recover their investment, Bair said.

"Generally if a creditor is secured, they are at the top of the claims priority," she said. "If they are unsecured, they're pretty low on the claims priority and probably will take some type of haircut with this, but we have not had a chance to do a thorough analysis to know ... how extensive those losses will be."

IndyMac spent the last two weeks trying to reassure customers that it was not near default.

On Monday, IndyMac announced it had stopped accepting new loan submissions and planned to slash 3,800 jobs, or more than half of its work force - the largest employee cuts in company history.

In the letter to shareholders, IndyMac Chairman and Chief Executive Michael W. Perry said the drastic measures were made in conjunction with banking regulators to improve the company's financial footing and "meet our mutual goal of keeping Indymac safe and sound through this crisis period."

The plan was supposed to generate roughly $5 billion to $10 billion per year of new loans backed by government-sponsored mortgage companies, Perry said at the time.

But the run on its deposits ultimately short-circuited the strategy, prompting regulators to take action Friday.

Associated Press writer Raquel Maria Dillon in Pasadena contributed to this report.

Treasury Proposes 'Unlimited Stake' in Freddie and Fannie

Paulson Seeks Authority to Shore Up Fannie, Freddie
By Brendan Murray and Dawn Kopecki

July 13 (Bloomberg) -- Treasury Secretary Henry Paulson sought authority from Congress to buy unlimited stakes in and lend to Fannie Mae and Freddie Mac, aiming to stem the collapse of confidence in the largest sources of U.S. mortgage financing.

Paulson proposed that Congress enact legislation giving the Treasury temporary authority to buy equity ``if needed'' in the firms, and to increase their lines of credit with the department from $2.25 billion each. The Federal Reserve authorized the companies to borrow directly from the New York Fed, in a step that could provide funding before the bill is passed.

Today's announcement followed crisis talks between the firms, government officials, lawmakers and regulators, after Fannie Mae and Freddie Mac lost about half their value last week. Paulson and Fed Chairman Ben S. Bernanke are trying to prevent a collapse in the firms that would exacerbate the worst housing recession in 25 years and deepen the economic slowdown.

Washington-based Fannie Mae and McLean, Virginia-based Freddie Mac own or guarantee almost half the $12 trillion in outstanding U.S. mortgages. As lenders retreated from the housing market, they have grown to account for more than 80 percent of the home loans packaged into securities.

Freddie Mac is scheduled to sell $3 billion in short-term notes tomorrow, and Paulson's comments indicate a growing concern that a crisis of confidence may take hold if investors balk. The companies issue debt to raise money for their purchases of mortgage securities.

Action This Week

Paulson spoke with congressional leaders and is confident that lawmakers will be able to add the measures in an existing housing bill and enact the package this week, a Treasury official told reporters on a conference call. The temporary authority granted to the Treasury may be for 18 months, the official said on condition of anonymity.

The plan would give Paulson power to buy an unspecified amount of stock in Fannie Mae and Freddie Mac, the official said. He also said he didn't recall any time in the past when the government has taken an equity stake in either company.

Paulson also proposed that the Fed get a ``consultative role'' overseeing the companies' capital requirements. The Fed said in a separate statement that the New York Fed was approved to make direct loans to Fannie Mae and Freddie Mac at the discount rate, currently 2.25 percent, charged to commercial banks.

Facing White House

The Treasury chief read his statement before cameras on the Bell Entrance of the department's building in Washington, facing the White House. The unusual step illustrated the significance of today's proposals.

Debt sold by Fannie Mae and Freddie Mac ``is held by financial institutions around the world,'' Paulson said in the statement. ``Its continued strength is important to maintaining confidence and stability in our financial system and our financial markets.''

Freddie Mac shares tumbled 47 percent in New York Stock Exchange composite trading last week and Washington-based Fannie Mae lost 45 percent of its value, forcing Paulson two days ago to issue a statement of support for the companies in their ``current form.''

``Use of either the line of credit or the equity investment would carry terms and conditions necessary to protect the taxpayer,'' Paulson said.

The government-chartered, publicly traded companies have already raised $20 billion to cover losses amid the highest delinquency rates in at least 29 years. Freddie Mac said earlier this month it planned to sell $5.5 billion of equity after it reports earnings next month.

To contact the reporter on this story: Brendan Murray at brmurray@bloomberg.netDawn Kopecki in Washington at dkopecki@bloomberg.net

Last Updated: July 13, 2008 18:29 EDT

Paulson Statement on Freddie and Fannie

US Treasury Plan to Inject $15 Billion Into Ailing Freddie and Fannie for Special Shares Class

Its liquidity, but its just not enough, so even if we do get a bounce on the news on Monday we will consider selling it.

The Sunday Times
US Treasury rescue for Fannie Mae and Freddie Mac
Treasury secretary looks at $15 billion cash injection for crisis-hit mortgage lenders
Iain Dey and Dominic Rushe
July 13, 2008

US TREASURY secretary Hank Paulson is working on plans to inject up to $15 billion (£7.5 billion) of capital into Fannie Mae and Freddie Mac to stem the crisis at America’s biggest mortgage firms.

The two companies lost almost half their market value last week as rumours of a government bail-out swept the stock markets, hammering share prices around the world.

Together, the two stockholder-owned, government-sponsored companies own or guarantee almost half of America’s $12 trillion home-loan market and are vital to the functioning of the housing market.

The capital-injection plan is said to be high on a list of options being considered by regulators as a means of restoring confidence in the lenders. The move would protect the American housing market, but punish shareholders in both companies.

Under the terms of the proposed move, the US government would receive a new class of shares in exchange for the capital, which would be hugely dilutive to shareholders.

The potential rescue comes as investors are braced for more bad news from the financial sector. Citigroup is expected to reveal further writedowns of at least $8 billion with its second-quarter results, and Merrill Lynch is forecast to reveal writedowns of some $4 billion.

Both banks are expected to post sizeable losses for the second quarter, and reveal plans to sell off billions of pounds worth of assets.

A number of US regulators and politicians have been attempting to restore confidence in the two mortgage agencies.

Paulson and President George Bush stepped in to give vocal support to the two firms on Friday. “Freddie Mac and Fannie Mae are very important institutions,” said Bush, adding that he had spoken with Paulson who had “assured me that he and Ben Bernanke [the Federal Reserve chairman] will be working this issue very hard”.

Paulson killed off speculation that the government would renationalise the two agencies, a move that would have pitched the US public accounts into a new state of crisis.

However, Paulson pledged to support the two companies “in their current form”. He is said to have been concerned about the prospect of a rescue plan benefiting shareholders.

The capital injection would also see both lenders granted permission to use the Federal Reserve’s discount window - a short-term emergency funding source.

Freddie Mac has a $3 billion short-term funding line that comes up for renewal tomorrow. The short-term debt is one of the hundreds of funding lines that the two agencies use.

The funding lines allow Freddie and Fannie to buy mortgages from America’s commercial banks, which it then sells on to bond investors through securitisations. A government guarantee on the company’s debts allows it to raise money cheaply, making mortgages cheaper to finance for US banks.

Some in Wall Street believe a rescue plan may be announced ahead of tomorrow’s US market opening to calm nerves and support the debt auction.

Howard Shapiro, a Wall Street analyst at Fox-Pitt Kelton, said: “I think it will happen over the weekend. There will be government action but it will be far short of the dire scenarios that people are envisioning.” He said there was “no question” that the two firms were fundamentally sound.

He added that Paulson would have to move in order to “change the psychology” of the market and put Fannie and Freddie back on a stable footing.

David Buik, partner at BGC Partners, said: “These agencies are the backbone of financial society in the US. They simply cannot be allowed to fail, and the government won’t allow them to fail. Whatever the solution is to this problem, I can’t imagine it will be good for shareholders.”

He added: “In London we may see a dead-cat bounce on Monday, especially if we get a rescue. But that’s all it will be - shares may pop up 50 points or so, but then they will head down again.”

In the UK markets, HBOS will this week complete its £4 billion rights issue in a move that could see underwriters Morgan Stanley and Dresdner Kleinwort lumbered with more than £1 billion of the bank’s stock.

More than 13% of the HBOS shares in issue have been sold short by hedge funds - a bet that the bank’s share price will fall.

Bradford & Bingley will also put its lifesaving £400m rights issue to a shareholder vote.

Robert Parkes, UK equity strategist at HSBC, said: “It’s a seller’s market - we’re generally advising clients to sit on the sidelines until all the current issues blow over.”