World's largest mortgage providers teeter on the brink of co

America's regulators were last night shoring up the country's financial defenses, after one of the biggest bank failures in US history sparked fears about the viability of the world's largest mortgage providers.

The Northern Rock-style collapse of California's Indymac Bank, which had assets of $32bn (16bn), came amid speculation that regulators are also preparing to step in to save the two federally-backed finance houses known as Fannie Mae and Freddie Mac, which together have commitments of $5 trillion, amounting to half of America's mortgage book.

Government officials closed down Indymac late on Friday, citing a massive run on deposits by worried customers. All 33 branches of the Pasadena-based bank closed three hours early, locking out hundreds of jittery investors hoping to withdraw their savings before it went under.

Amid chaotic and often angry scenes, it emerged that Indymac will reopen tomorrow as Indymac Federal Bank. According to a two-page notice taped to branch doors, it had been in an "unsafe and unsound condition" and was unable to meet continued demand by customers for their deposits. The Federal Deposit Insurance Corporation, a government regulator, will guarantee all deposits of up to $100,000 - a commitment that may nonetheless leave more than 10,000 savers out of pocket

Indymac, known ironically as a "thrift" bank, becomes the second-largest savings firm in US history to go under, after the Continental Illinois National Bank and Trust Company, which collapsed in 1984. The latest failure was caused by massive losses in the so-called "foreclosure crisis", which has seen huge numbers of property owners defaulting on mortgages taken out at the height of the property bubble........Read More