IndyMac reassures customers after Schumer letter

The Pasadena, Calif.-based mortgage lender said Monday that the letter, by Sen. Charles Schumer, D-N.Y., gave "the wrong impression" on several issues.

Depositors withdrew about $100 million from the bank in the wake of Schumer's letter, company spokesman Grove Nichols said in a prepared statement. The withdrawals are equivalent to one-half of 1 percent of the bank's deposits, he said.

"While branch traffic is somewhat elevated this morning," Nichols said, it is "substantially lower than on Saturday."

Schumer said Tuesday that he had spoken with Treasury Secretary Henry Paulson and Sheila Bair, chairman of the Federal Deposit Insurance Corp., and "I am reassured they are on top of the situation."

IndyMac's depositors "should not worry," he added, as they are covered by FDIC insurance.

The letter surprised some analysts, who said it could make it harder for a troubled bank like IndyMac to recover.

A public airing of the bank's difficulties could encourage customers to withdraw funds and force the bank to pay higher rates to attract deposits, said Bert Ely, a banking consultant based in Alexandria, Va.

IndyMac's stock, which has fallen more than 95 percent in the past year, rose 3 cents, or 4.8 percent, to close at 65 cents Tuesday. The company's shares have traded as high as $31.50 in the past year.

The bank has been clobbered by write-downs on mortgage-backed securities. The company warned last month that it wouldn't return to profitability this year unless the slide in U.S. housing prices slowed.