Posted on 07/12/2008 3:08:39 PM PDT by upchuck
The $32 billion failure of U.S. mortgage lender IndyMac demonstrates just how differently the United States is governed than Canada. This from today’s Wall Street Journal:
Mr. Schumer quickly fired back.The director of the Office of Thrift Supervision, John Reich, blamed IndyMac’s failure on comments made in late June by Sen. Charles Schumer (D., N.Y.), who sent a letter to the regulator raising concerns about the bank’s solvency. In the following 11 days, spooked depositors withdrew a total of $1.3 billion. Mr. Reich said Sen. Schumer gave the bank a “heart attack.”
“Would the institution have failed without the deposit run?” Mr. Reich asked reporters. “We’ll never know the answer to that question.”
“If OTS had done its job as regulator and not let IndyMac’s poor and loose lending practices continue, we wouldn’t be where we are today,” Sen. Schumer said. “Instead of pointing false fingers of blame, OTS should start doing its job to prevent future IndyMacs.”
You might be asking yourself, why is a New York Senator asking a regulator to look into a California bank’s “solvency”? Sen. Shumer is a member of multiple committees, each of which gives him a call on the financial markets and banking sector: Banking, Housing and Urban Affairs & Finance are two of his key Senate committees. He also Chairs the Senate Subcommittees on Economic Policy (Banking).
Having established that he has an oversight interest in the banking world, just what is he doing writing letters that could be seen to encourage panic on the part of depositors? When his staff sat around and discussed what to do before the letter was issued, they would have discussed the obvious risks to IndyMac’s solvency if a key U.S. Senator was raising concerns about solvency. At the same time, others would have advocated that “he has to be ahead of the issue” and “on the record” before Indymac hits the wall.
It’s not like Americans haven’t lived through a year of warnings (see prior post “US subprime borrowers sink deeper into trouble” June 15-07) about the financial health of small to mid-sized U.S. financial institutions. Many Californians lined up last summer to get their savings out of Countrywide Financial (CFC), for example (see prior post “Has the run started at Countrywide?” August 18-07). Moreover, Sen. Shumer’s anger appeared to be directed at the Office for Thrift Supervision, as much as it was at IndyMac’s management. I’m not sure that five votes in New York State tilt on whether or not Sen. Shumer was “out in front” on this issue or not. His profile is so high, and his power to get projects passed for N.Y. so clear, that his Senate seat is likely in the bag for several terms to come.
Which makes it all the more interesting that he got into the details of this specific situation. It appears to me that he was just doing his job. Which is probably more than you can say, as an outsider, for the Office of Thrift Supervision [OTS].
If the SEC continues to be AWOL on most of its mandate, and the OTS can’t help its charges avoid insolvency, huge corners of the U.S. capital markets fall to those members of Congress who are prepared to take the baton.
Here are some more recent threads about how the Senior Senator from New York destroyed a bank:
http://www.freerepublic.com/focus/f-news/2044490/posts
http://www.freerepublic.com/focus/f-bloggers/2044299/posts
http://www.freerepublic.com/focus/f-bloggers/2044299/posts
http://www.freerepublic.com/focus/f-news/2044226/posts
Schumer needs to be investigated big time about this. Especially why he singled out IndyMac.
He is truly a scumbag!
P-U-T-Z
Look up Schumer in the dictionary, it's right next to the word scumbag!
bump
Some of you are much better at this than I am...
Can somebody determine if IndyMac has ever contributed to Schumer?
I’m betting not.
Being a muckety muck on banking this and banking that in the Senate, I expect the banks donate big time to him.
Just behind “microphone.”
How did a letter from Senator Schumer to the Office of Thrift Supervision ever become public? Someone had to bring it to a reporters’ attention, then explain to the reporter what the letter means, and then proofread what the reporter wrote down to ensure it is correct. Who did this?
he is between scumbag and schudenfrude
Theory 1: Schumer is the head of the Senate Democratic Campaign Committee. If he can show that he can destroy a bank by circulating a letter questioning its solvency, then he might expect that will lead to more campaign contributions from fearful financial institutions.
Theory 2: He believes he can increase Democrat gains in November by causing one or more banks to go under, producing more economic turmoil
Hate to say this boys, but the people who deregulated this industry are also responsible. The Financial Modernization of Act of 1999 which is called Gramm-Leach-Bliley which repealed the Glass-Steagall Act created all this nonsense with the Financial Industry we see today. That is more the reason than some premature words spoken by a foolish Senator. If this industry wasn’t allowed to run wild we wouldn’t have this situation now to even comment upon. Is it anyone’s surprise that Phil Gramm is in denial?
Regulators to Schumer on IndyMac: Please shut up
5:47 PM, July 2, 2008
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. Now the New York Democrat is getting some harsh blowback from one current and one former regulator.
Their message, distilled: Zip it, Chuck.
As noted here on Monday, Schumer sent letters to the Office of Thrift Supervision, the Federal Deposit Insurance Corp. and the Federal Home Loan Bank of San Francisco, saying he was “concerned that IndyMac’s financial deterioration poses significant risks to both taxpayers and borrowers.”
http://latimesblogs.latimes.com/money_co/2008/07/sen-charles-e-s.html
From what I have heard from news reports, this letter was circulated all over California, causing a run on the bank. An investigation should definitely be made as to how it became public and achieved such widespread circulation.
IndyMac has no PAC, its executives made no political contributions, and it does not even have a registered lobbyist in Washington. My guess is it was completely blindsided by Schumer. Whatever deals it may have been working on to line up new capital infusions or to sell any of its assets went right down the crapper, along with over a billion dollars in deposits that were withdrawn by panicked customers.
Oh please. If all it took was a comment from Chuck Schumer to bring down the bank then it was on it’s last leg to begin with. Schumer could have praised it to the skies and it would have failed anyway.
The author of the article quoted from the Wall Street Journal.
This is arrant nonsense being circulated by the DNC. Gramm-Leach-Bliley had NOTHING to do with the subprime mortgage boom or its bust. The blame for this mess lies with liberals who continually pressured banks to lend more and more money at easier and easier terms to poorer and poorer people. Also with state governments, most of which are controlled by Democrats, who refused to regulate mortgage brokers. The vast majority of the bad loans that are in foreclosure today were originated by largely unregulated mortgage brokers. IndyMac was a big player in the broker business. When you take unregulated people with no responsibility for the performance of the loan, then pay them commissions based on how high an interest rate you can sell them, it's a recipe for disaster.
Democrats have been in charge of Congress since January of 2007, yet they have not passed a single piece of legislation that could have reined in some of the worst lending practices. When Democrats ran the Senate in 2001, they didn't pass any such legislation either. Talk about people in denial!
Schumer is what he is, and I don’t agree with him on much of anything. But, he didn’t force IndyMac into FDIC receivership. They were already well on their way there before he opened his mouth.
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