Feds cite Schumer in collapse of IndyMac

An important angle in the IndyMac failure that may get lost in ominous headlines tonight and tomorrow: federal regulators pointedly cited U.S. Sen. Charles Schumer, D-N.Y., in explaining the bank's failure. In simple language, federal regulators blamed Schumer for a run on the bank.

Here's from the press release issued by IndyMac's regulator, the Office of Thrift Supervision: "The OTS has determined that the current institution, IndyMac Bank, is unlikely to be able to meet continued depositors’ demands in the normal course of business and is therefore in an unsafe and unsound condition. The immediate cause of the closing was a deposit run that began and continued after the public release of a June 26 letter to the OTS and the FDIC from Senator Charles Schumer of New York. The letter expressed concerns about IndyMac’s viability. In the following 11 business days, depositors withdrew more than $1.3 billion from their accounts.

"This institution failed today due to a liquidity crisis," OTS Director John Reich said. "Although this institution was already in distress, I am troubled by any interference in the regulatory process."

Schumer's response? In an e-mail quoted by Bloomberg News, he says: "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 ... Instead of pointing false fingers of blame, OTS should start doing its job to prevent future IndyMacs.''

Your thoughts? Comments? Use the comment button below.
E-mail story tips to peter.viles@latimes.com.
Photo Credit: www.schumer.senate.gov; Note: This replaces an earlier photo showing Sen. Schumer with his New York colleague, Sen. Hillary Clinton; many readers found the choice of the photo inappropriate.

Comments

[Calc]

Schumer was media whoring, he is the Gloria Allred of Congress. If he wanted to help the situation there was a million ways to do that than go out and try to get his name in the news.

[BC]

As much as I don't particularly care for Schumer, right on... call a spade a spade and move on.

[chad]

Good job with the picture, trying to tie Hillary in with this mess. What's the matter, Peter, couldn't you find a picture of Obama and Schumer?

[Mike P.]

Schumer is right... in today's credit crisis, if IndyMac had been viable, we'd see some super-nifty Fed program, or a loan package from the Federal Home Loan Bank (which has already screwed over taxpayers by bailing out Countrywide before it went under), which it could've used to get thru its bank run.

The fact that FDIC has taken it over indicates the bank was completely insolvent.

[Uncle Billy Went to Washington]

Well we all know what happened after he said what he said. Question is why he said it, and who he had dinner with the night before he said it. Take a close look at who Schumer's real friends are and you will have a better explanation of his motives, I think.

We might be able to tell who his real friends are by looking closely at who profited most by Indymac's demise.

[layne]

the OTS doesn't do it's job...blame shumer.

indymac choses to make high risk alt-a loans and loses it's shirt...blame the consumer.

consumers buy houses they can't afford...blame the banks.

i love this era of no personal responsiblity...

[Tony]

Chad, Hilary is tied into this mess. It was her big campaign promise to help the poor struggling homeowners, which, incidentally, would also help out all of the banks that she's so close with (and who this bailout is really for). And then it was her big idea to have Alan Greenspan be an expert on how to deal with foreclosures in America. But in her defense, Greenspan should know a lot about it, since he basically was at the center of starting this whole mess.

[Joseph The Real Estate Guy...]

What's next???

[Tombstone Realty]

Well *if* this Charles Schumer guy was lying, and just trying to take down the bank because...um, he didn't have anything else to do that weekend or something....

Then why didn't the Fed immediately come out and say that nothing was wrong, and publically censured Schumer?

The letter was released June 26, it's now July 11. Where was the Fed/OTS/Mr. Paulson?

It's not like we haven't been hearing about IndyMac long before Schumer opened his mouth.

[Omni]

Imagine how great a financial institution, and in the larger picture the US economy, if the words of one man can cause such a disaster! The blame sits squarely on the administration and hoodlums - better known as George and the Republicans. Coming soon to a nightmare near you!

[Jack]

Schumer never met a microphone he didn't like, but he's not to blame here. The OTS management couldn't find their fannies if they were sitting on their hands. They're trying to pass the buck here for their woeful failure.

[Duane Laible]

It is well known that the most dangerous piece of real estate in Wash. DC is the area between Schummer and a TV camera.

[Baronpilot]

Hey, Schumer is from New York. What's so strange about him commenting on the solvency of a Bank in Pasadena? I mean, it's not like any banks in New York have some similar financial situation, is it? Because if they did, then maybe this was a little mis-direction.

Schumer isn't that smart, is he? Nawwww.......

[Aristotle]

It's a whole new bank seizure environment. Watch the FDIC arrive, live:

http://abclocal.go.com/kabc/index

Senior citizens trying to get into closed bank:

http://video.knbc.com/player/?id=275106

Sad to say, not everyone got their uninsured deposits out of the bank. The FDIC and press are saying there are $1 Billion in uninsured deposits.

I don't like the idea that the Feds get to game the system, keep depositors in the dark, and then keep their uninsured deposits. Senator Schumer was right to publicly warn people. Too bad some depositors were soothed by the IndyMac public relations machine.

[Jack Mehoffer]

schumer is a low life wind bag who never shuts up!

[Giacomo]

Calc said: "Schumer ... is the Gloria Allred of Congress."

Well said, and so true.
A good thing to remember next time he's mouthing off on some other topic.

That said, IndyMac deserved to fall.

[Brady Westwater]

The major shareholders in INDYMAC should be shopping for a lawyer for their lawsuit against Schumer. Unless his holding public office makes him immune from the laws that govern the rest of us.

[thenightmareofme]

I would like to second what "Uncle Billy Went To Washington " stated

Keep and eye out for who is friends with Schumer, and the possibility that he will be investigated along with this assets.

Ask yourself, what business any senator would have to do a bank, he has no dealings with. NOTHING.

Unless he got paid off to start a scare in order for a "friend" to purchase this company, whom otherwise would not have been able to

I would like to see him investigated for Conspiracy to commit a crime and expect to see it.

[Alex]

I'd look at Schumer very closely as he is connected in a back door way. Never trust a politician when their mouth is moving, especially a POS like Schumer.

[Inland Empire]

Dang Pete the only picture of Schumer in the LA Times Library is with Hillary. I guess your post with this picture is that Hillary is connected to Schumer so what??. I'm lost please explain this and its connection to this article. A reader of your blog and not your editor however...

[Lance]

It seems like there are a lot of uninformed comments being posted here. NO BANK can withstand a large portion of its depositors taking their money out over a short period of time. Your deposit money isn't just sitting in a vault somewhere. The bank loans it out so that it can pay YOU interest. Banks are only required to have enough liquid capital to handle normal operations plus some reserve. Schumer created a run on the bank with his inappropriate comments and that's what caused it to fail.

[Lance]

It seems like there are a lot of uninformed comments being posted here. NO BANK can withstand a large portion of its depositors taking their money out over a short period of time. Your deposit money isn't just sitting in a vault somewhere. The bank loans it out so that it can pay YOU interest. Banks are only required to have enough liquid capital to handle normal operations plus some reserve. Schumer created a run on the bank with his inappropriate comments and that's what caused it to fail.

[steve carl]

Chuck Schumer, Self-Appointed Investment Banker and DNC(Do Nothing Congressman and Senator)

http://blogs.wsj.com/deals/2008/05/07/
chuck-schumer-self-appointed-investment-banker
mod=WSJBlog

[Tommy Jalisco]

I moved to Mexico - HA! My patriot buddies are still in debt. I'm retired at 40! Viva credit! Viva debt! Vivan "Got-to-get-it-NOW Idiots! Muhuhuuuhuuuuaaaaaaahhhhh......

Adios amigos gringos!

[tew]

They're both right. Shumer is a dirtbag and the OTS and other regulatory agencies didn't do their jobs.