4:11pm UK, Sunday July 13, 2008

One of America's largest mortgage lenders has collapsed, as the credit crisis grows.

IndyMac

IndyMac Bank is the second largest financial institution to fail in US history.

Regulators feared the California-based bank did not have enough cash to cope after panicked investors withdrew more than $1.3bn in 11 days and seized its assets.

The business will reopen on Monday as IndyMac Federal Bank, under supervision of the Federal Deposit Insurance Corporation, which will try and find a buyer.

IndyMac was founded in 1985 by David Loeb and Angelo Mozilo, who also founded Countrywide, another big mortgage lender whose loans helped fuel the housing boom.

Countrywide was taken over last week by Bank of America Corp.

IndyMac collapsed as shares in two of America's home loan institutions - Freddie Mac and Fannie Mae - saw their share prices slashed in half.

With the collapse of IndyMac and the recent concerns related to Fannie and Freddie, it seems clear we may not yet know the full impact and scope of this crisis.

The continuing financial uncertainty in the marketplace will focus the US voters on the crisis and force the two presidential candidates - both weak in this area of finance - to come up with a real plan to stabilise the US economy.

This is one of those 'events' that may play an unexpected role in determining the outcome of the November Election.

Jon-Christopher Bua, Sky News US political analyst

US Treasury Secretary Henry Paulson indicated that a bailout - or putting them under public control - was unlikely.

Both firms insist they have enough capital to weather the storm.