Bloomberg News reports that the Federal Deposit Insurance Corporation (FDIC) closed down IndyMac Bancorp (NYSE: IMB), a $32 billion (Q1 2008 assets) mortgage lender. Is this just the beginning of a string of such failures?

Having spent a summer 26 years ago working with the FDIC, I fear that that will be the case. What we worked on back then was a system to help the FDIC handle the assets that it acquired when it took over a failed bank. The FDIC's role is to sell those assets and get as much money as possible as quickly as it can so that it can pay people to whom the failed bank owes money.

Bloomberg reported that IndyMac failed due to a run by depositors who left the California mortgage lender with insufficient cash. Fortunately for depositors, customers will have access to funds this weekend via ATMs. IndyMac trails only the former Continental Illinois -- which was the biggest financial institution to close -- back in 1984.

A great book about the failure of its business partner, Penn Square Bank, Belly Up, reveals the important role of syndication -- originating a loan and then selling it to someone else -- in the failure of financial institutions.

IndyMac Bancorp Inc. (NYSE: IMB) is continuing to see problems with raising enough money to stay in business. In fact, the bank has ceased taking loan applications. In addition to not taking new lending business, the company will lay off more than half of its workforce, about 3,800 employees.

The problem is that IndyMac hasn't lined up any new financing or capital investment and doesn't expect to recover until the mortgage market begins recovering. In other words, the rest of 2008 is going to be pretty harsh for the once high-flying mortgage lender. CEO Michael Perry said that U.S. banking regulators have asked IndyMac to submit a business plan that will show how the struggling lender will get back on its feet.

The retail and wholesale loan divisions will be closed to new business as the company tries to build its reverse mortgage business while maintaining the existing loans in its portfolio. Perry went on to say that "These are the largest and most difficult staff reductions we have ever had to make" in reference to IndyMac's looming layoffs. He also requested that IndyMac's board cut his $1 million annual salary in half (no word on bonus cuts). At least one banking CEO has a conscience, right?