Interim CEO discusses biggest bank to fail

John Bovenzi wanted Wichita bankers to know Thursday that it wasn't his idea to be the interim CEO of the biggest bank to fail at the cusp of the current banking crisis.

"I don't think I volunteered," said Bovenzi, who in July 2008 was tapped by Federal Deposit Insurance Corp. Chairman Sheila Bair to run the failed, $32 billion IndyMac Bank after the bank had been closed by the Office of Thrift Supervision and placed into FDIC conservatorship.

Bovenzi, former chief operating officer and deputy to the FDIC chairman, was in Wichita to speak to the local chapter of the Risk Management Association.

What he initially told his wife would be a posting lasting a "couple of weeks" turned into a six-month assignment, he told the more than 50 bankers listening to his presentation at the Petroleum Club.

"IndyMac was messy," said Bovenzi, who is now a partner in the financial services practice of international consulting firm Oliver Wyman.

The 33-branch, Pasadena, Calif.-based savings and loan had $1 billion in deposits withdrawn from it a week before the OTS closed it in July 2008.

There were 160,000 accounts to sort through at IndyMac, to determine which had insured deposits, Bovenzi said.

A few days after taking over IndyMac, the FDIC learned there was "$400 million in uninsured deposits and another $1.7 billion that we needed more information about," he said.

And it had untold numbers of "no-doc" mortgages on the books and in the loan pipeline, Bovenzi said.

The primary focus in Bovenzi's first week at IndyMac was to ease customers' fears about losing their money and to maintain public confidence in the deposit insurance system.

It wasn't an easy task. He spent his first day personally talking customers out of withdrawing their money. And at all IndyMac branches in the first few days of the takeover, there were long lines of customers wanting to do just that.

Once that was resolved, the next big task was trying to find a buyer for IndyMac, a process that typically starts months before regulators close a bank.

That effort had its own set of complications.

"We had a little problem there because we had hired Lehman Bros." to consult on selling IndyMac. Lehman, an investment bank, went into liquidation bankruptcy about two months after IndyMac failed.

The FDIC eventually was able to sell IndyMac to a consortium of private equity firms organized as OneWest Bank.

But the closing of IndyMac is still expected to cost the FDIC and its deposit insurance fund about $10 billion, Bovenzi said.

"We were a bank that had no capital," he said.