IndyMac coverage sees media confused: bank or thrift?

CNN was live in Pasadena, Calif., on Monday with an identification line on the TV screen reading:  Bank customers in limbo.

It related to a long line of account holders waiting to enter IndyMac Bank offices in groups of 10.  The financial institution was shuttered Friday by federal officials and reopened, under federal supervision, Monday as IndyMac Federal Bank, FSB.

The customers were surprisingly fuzzy on whether their deposits were covered by the Federal Deposit Insurance Corp.  (Depositors’ accounts at IndyMac are insured up to the statutory limits by the FDIC’s Deposit Insurance Fund.)

Equally fuzzy were many reporters, editors, headline writers and broadcasters on the type of institution that was closed, notes Grumpy Editor.

Most simply used the word “bank.”

That was partially correct --- but technically wrong.

What confuses things is “bank” in the name of the institution.  The full name of the failed operation:  IndyMac Bank, FSB.  The FSB stands for federal savings bank, which is different from a commercial bank such as Bank of America.

A savings bank’s primary purpose is accepting deposits and putting those funds to work as a mortgage lender.  Clouding things somewhat is that since deregulation in the 1980s, a savings bank can offer services competitive with many commercial banks.

Along with savings and loan associations, savings banks also are called “thrifts.”  So thrift, correctly, should be in headlines and texts relating to IndyMac.

Some stories leading up to and beyond the closure of IndyMac used both bank and thrift in describing the financial institution.

Regulating and supervising the thrift industry (including IndyMac) is the Office of Thrift Supervision, an office of the Department of the Treasury.

IndyMac specialized in making and selling so-called Alt-A mortgage loans, a category of loans to consumers more creditworthy than sub-prime borrowers but typically without the complete documentation of income or assets necessary to receive a prime-rate loan.

Stung by loan defaults, it was the largest OTS-regulated thrift ever to fail and the second largest financial institution to close in U.S. history.