Federal regulators seized and shut down IndyMac on Friday evening. The bank will reopen today under federal control.
For the first time in recent history, a United States Senator is being blamed for the crisis.
In a written statement, the Office of Thrift Supervision, which regulated IndyMac, said "the immediate cause" of the failure was statements made by Sen. Charles Schumer, a New York Democrat. Mr. Schumer in late June publicly raised concerns about the bank's solvency.
"Although this institution was already in distress, I am troubled by any interference in the regulatory process," said OTS Director John Reich.
How could a U.S. Senator have that impact? Well, Schumer had concerns about IndyMac that he forwarded to the Office of Thrift Supervision and others. The problem, of course, is that Senator Schumer did not keep his concerns private. He made them very public through a series of well orchestrated leaks. Those leaks necessitated IndyMac filing a notice with the SEC that noted "as a result of Sen. Schumer making his letters public and the resulting press coverage, we did experience elevated customer inquiries and withdrawals in our branch network last Friday and on Saturday of roughly $100 million."
As the Los Angeles Times reported, "Sen. Charles E. Schumer publicly taunted bank regulators last week about IndyMac Bancorp's financial condition, which helped trigger a sudden outflow of deposits from the Pasadena thrift."
Bill Clinton's Comptroller General, John M. Reich, put some perspective on Schumer's actions.
"If Schumer continues to go public with letters raising questions about the condition of individual institutions, he will cause havoc in the banking system," Hawke said.
"Leaking his IndyMac letter to the press was reckless and grossly irresponsible. I don't see how he can be trusted with confidential information in the future. What this incredibly stupid conduct does is put at risk the willingness of regulators to share any information with the [congressional] oversight committees. After this, you'd be crazy to share information with Schumer."
If Senator Schumer wants to grand stand, that's fine. But let's not dance around it. His actions have very real consequences, for which he should be held responsible.
So, let's investigate Chucky
ssides July 14th, 2008 at 6:51 a.m. (link)
Does he own stock in any of IndyMac's competitors? Do any of his big campaign donors?
How is this not market manipulation?
According to Democrats, it’s greedy to want to keep your own money, but it’s “justice” to demand someone else’s.
--Jonah Goldberg
Not really
ss396 July 14th, 2008 at 7:08 a.m. (link)
I don't suppose the excessivly risky debt picture, the over-extension of the bank's resources, and the resulting fragility that arose from that had anything to do with IndyMac's failure, did it? Everything was OK as long as people didn't know about it? I thought that we were supposed to be the advocates of fiscal responsibility. Even Berneke was hinting that banks need to be allowed to fail in order to bring some discipline back into the institutions.
I could really give a hang about Schumer, but this falls well within the category of "shoot the messenger".
But for his belly, man would be a god.
Not 'shoot the messenger'
The_Gadfly July 14th, 2008 at 12:40 p.m. (link)
It's the reverse of the crime for which Martha Stewart was convicted by a judge. Both possessed privileged information and acted upon it in a manner not permitted by law. Stewart sold stock before the news was made public, which benefited her personally and not the stockholders to whom she was beholden. Chuckie had information he was obligated to keep confidential until the OTS completed it's investigation. If the OTS had completed its investigation and determined charges were appropriate, it could then have seized the bank largely intact and fairly distributed whatever assets it had. If not, there would not have been a run on the bank and it might not have failed. Either way, Chuckie damaged the community by his egocentric actions.
One man's excessive risk is another man's reasonable expectation. The bank might not have been overextended but for the Bears Sterns meltdown. Once that happened, it wouldn't have had the time and wherewithal to adjust appropriately before Chuckie went after them. In point of fact, there's a very real sense in which all of Congress is to blame for the mess. The bank in question specialized in a type of mortgage that was essentially mandated by Congress so banks wouldn't be accused of redlining. And now that IndyMac has failed, Congress has been forced to promise to underwrite Freddie and Fannie, which means we are now all potentially at risk for more 5.2 trillion dollars.
5.
Erick Erickson July 14th, 2008 at 12:55 p.m. (link)
That's an excellent comment.
Who will stand on either hand and keep this bridge with me?
As an employee of a financial institution
Trelaina July 14th, 2008 at 8:02 a.m. (link)
with a dropping stock price, I am livid at Schumer's actions.
Of course the bank was in trouble already. This might likely have happened anyway regardless of this childish, stupid stunt. The point is, I expect a US Senator to be a professional, to understand confidentiality, and to act in the best interest of the country, not his own bloated ego.
Senator Schumer, shame on you...not that you care about shame.
"I would be a poor Commander in Chief" -- Barack Obama, July 3 2008
Agree.
Rod_Patrick July 14th, 2008 at 3:07 p.m. (link)
Leaking information regarded as as "confidential" is a crime, especially on the part of a US Senator.
The senator must be investigated.
The Democrats talked down the war. They got U.S. troops killed.
29Victor July 14th, 2008 at 11:18 a.m. (link)
Why should talking a bank to death bother them at all?
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So, since Chuckie clearly can't investigate himself,
The_Gadfly July 14th, 2008 at 12:17 p.m. (link)
can we demand Congress appoint a special investigator with unlimited funds, subpoena power, and unlimited time to investigate him for any misdeeds he may have made while serving as a US Senator?
NOT ME!
ontime July 14th, 2008 at 2:31 p.m. (link)
So Chuck U didn't have a thing to do with all this, well he did but he's just doing what he does best quick stepping to dodge another of his infamous screw ups. These democrats in office are like the RINO's we have, almost, libs never cross the aisle but RINO's will always have that brab wire rash on their crotch. They whine, lie and run for cover when their about to be exposed to daylight.
Now what I want to know is with all this bail out going on and tons of my tax money going down the tubes, can I get a bail out for myself? If the EPA claims I am now worth only $five mil as a human being, whereas before I was worth $six mil, don't you think the guvmint should bail me out? It's my money and I want it now.......