Here’s a doomsday scenario that, while not likely, could play itself out in the next few days or weeks as a result of the IndyMac failure. Consider these events:
1. The many depositors with over $100k in their IndyMac accounts are SOL.
2. Depositors in other smaller and weaker banks across the country with over FDIC limits in their accounts panic and withdraw.
3. The weakest banks (Downey, WaMu, Wachovia, etc.) face the biggest flood of withdrawals.
4. The strongest banks get stronger, the weakest fail. (note to stocktradr: Go long on Wells, short Wachovia).
Whether this happens or not, we’ll know in a few days.
