Schumer on IndyMac's failure: Stop blaming me!

Sen. Chuck Schumer today went on another counterattack against federal banking regulators who’ve blamed him for helping cause the failure of IndyMac Bank.

At a news conference, the New York Democrat repeated his contention that the bank’s regulator had been "asleep at the switch." He said his public questioning of IndyMac’s financial health in late June merely stated the obvious.

"The administration is doing what they always do, blaming the fire on the person who called 911," Schumer said, according to the Associated Press’ story from the news conference in New York.

Pasadena-based IndyMac, with $32 billion in assets, was seized by the government Friday. The loss-ridden mortgage lender had faced an outflow of deposits since Schumer on June 26 made public a letter he sent to the Office of Thrift Supervision and the Federal Deposit Insurance Corp., saying he was "concerned that IndyMac's financial deterioration poses significant risks to both taxpayers and borrowers."

Schumer’s decision to go public with those comments ignited a firestorm in Washington. Regulators on July 2 said he was contributing to "rumors and innuendo" about the bank that could hasten its demise.

On Friday, regulators specifically fingered Schumer for IndyMac’s failure. The Office of Thrift Supervision said in its statement announcing the seizure that "the immediate cause of the closing was a deposit run that began and continued" after Schumer went public with his concerns.

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

The FDIC estimates that IndyMac’s failure will cost the agency between $4 billion and $8 billion as it unloads bad loans and makes insured depositors whole.

Schumer today said his June 26 letter contained "no new revelations" about IndyMac. He repeated much of his previous defense of his decision to go public about the bank’s ills, including his assertion that the OTS was "a weak regulator" and that "my job was to try and toughen them up, and that's what I tried to do."

Photo: Sen. Charles E. Schumer by Mark Wilson/Getty Images

Comments

[Nathan]

I wonder what Schumer's actions would have been had the bank been based in his district in NY.

[Bob C]

It's been said that your life is in danger if you get between Schumer and a microphone or photographer. He isn't called Senator Motormouth without reason. He was right to raise concerns with the OTS about Indymac. He was wrong to raise those concerns in public. Schumer's public indiscretion led directly to the depositor run on the bank, and he can't duck that fact by calling others names.

[Get Real]

He released the news to the media without the courtesy of letting his "concern" letter reach IndyMac first. That was despicable. They couldn't even mitigate the run.

[William R. Bauer]

Look, the bank was a mess. Senator Schumer, a highly intelligent senator who knows the lay of the land, used the only weapon a senator has: exposure. The fault is with the bank and the regulators, not the Senator. For G-d's sake, you people, wake up!

[David]

Come on--who does Schumer think he's kidding? What; he didn't know his 'concerns' would precipitate a run? He pushed IndyMac off a cliff to get some ink. Way to go, Chuck!

[John Smith]

Of course the senator knew what he was doing. He didn't care about the well being of the bank he was using it as a political play. Being en employee of the bank it could have survived for a longer period of time as they were trying to get things under control. But the selfish senator either didn't think about what he was saying when he made the comments to the public or is a complete idiot and moron for not thinking that people would run for their money and creating a panic. People like this should not be in a position of power and should be stripped or impeahced from his position. He has no common sense and is moronic.

[Greg L]

Schumer is either one of the dimmest bulbs on the porch or a flat-out liar. How could he not know making his comments public would cause a run on the bank? Now he's trying to spin his way out of his actions that will cost me, the taxpayer. The FDIC has a long history of finding buyers of troubled banks and allowing an orderly transition. A deposit run is the worst possible scenario, and Schumer caused it.

[Jim Townes]

The comments may not have been the most appropriate in the world.

But his rebuttal is without a doubt the right one.

These banks and brokers that were giving out half a million dollar loans to people that had no business getting them are the ones to blame.

It was crazy. We have governmental regulations to prevent these messes but Bush and allies think regulation is a bad thing - well unregulated banking if not bailed out would have lead to the greatest economic melt down in our countries history - hopefully a government bail out will prevent it but the truth is this industry should have been regulated and not allowed all of these bad loans in the first place.

[Bart]

John Reich is a community banker with an MBA from University of South Florida, a non-rated business school (www.businessweek.com/bschools/rankings). Mr. Reich dropped the ball helming the OTS; he let the foxes into the hen house. Reich however is a loyal Republican. He is like, "Brownie" another Bush crony.

Schumer did the right thing going public with his letter. Depositors have every right to remove their money from a weak bank, if they want to. I can't believe the hubris of people like Reich who think management at a badly run bank should be protected more than depositors. But that is the Republican mindset protect your cronies, screw the general public.

[Andre]

When are you Bush voting idiots going to realize when somebody is telling the truth that this is a GOOD THING!

This Neo-con "free market" BS just cost everyone thousands of dollars in bail-outs. Add it to the Iraq war tab.

Yet, when a Senator calls it like he sees it you Rednecks with Neckties lambaste him?
Are you people really that dense?

This is why we the people pay him his salary!
He is doing his job in respect to the protection of the American people!

If you clowns what to get mad at someone then how about Bush and his Enron loving administration?
Ever notice that EVERY SINGLE institution that Bush has been involved with has failed? But hey, at least the queers cant marry!

[Oscar]

The bank failed due to a depositor run (liquidity crisis) not because of its asset quality concerns. Had Schumer kept his mouth shut, no one can say if or when the bank may have failed, but he is clearly to blame for shouting "fire" in a crowded theatre. When the OIG investigates this bank failure, he should not be able to hide; however, this type of public figure will likely escapre without a scratch.

[Horst]

Schumer's decision to go public was deplorable. While he may think his action will toughen the OTS, it will only end up costing the taxpayer plenty.
This should have been handled behind closed doors, not in public.

[Bart]

The posters on here who think Schumer should have hidden the truth are part of the problem. We are entitled to know every bank on the FDIC's troubled bank list. Let individual depositors decide if they want to take their money out. Didn't Bush tell us we are in the "ownerhsip society"? It's our money, if we want to remove it from a failing bank, why should the FDIC make it harder for us?

[Robert Mack]

If you've ever watched Schumer on the Sunday news programs you would know he is just a jellyfish when it comes to straight talk. He's one of the reasons congress is held in such low esteem. He will squirm, sneak and or answer another question which was not even asked...all to avoid telling answering the truth. He has mastered the art of "telling the truth, just not the whole truth."

When I compare him with the late Senator Daniel Monihan from New York...I almost get sick at how far we've lowered the bar.

Certainly IndyMac as with more banks to come, was the main contributor to their own plight in direct contrast to some old tradional conservative banks like Marshall and Ilsley to name one. When I was shopping for a I.R.A. in March, IndyMac was offering a very high rate....which sometimes can be a flag?

But Schumer helped them into the takeover by opening his big mouth and causing a run. Now he's not even man enough to admit he did wrong.

Now for all you guys who say he should have done what he did.....Their are 80 more banks on a special watch list of which IndyMac wasn't even on the list....I guess Schumer should be calling out these 80 banks also...what say you?

This guy is a slippery snake.

[Tony Wong]

Who is to blame? Remember the $500 billion Savings and Loan Bailout back in the 80s that cost the taxpayers. It is the regulators to prevent such a thing. On ABC World News tonight, the reporter stated that OTS has a watch list of about 90 banks. What if the names leak out? If you are a depositor over $100K, do they have the right to know the bank is on the watch list? I agree with Greg L's comments.

[RLB]

Upchuch has his heat up his arse.....what do you expect.....

[Chris Johnson]

I hear complaints that the sub-prime loan implications have been consistently downplayed by Wall Street and he banking regulators. Now, someone comes out and speaks the truth and no one likes that either. Stringing this debacle out only prolongs the pain. What do you want folks want, the truth or disingenuous promises?

[annie c]

His comments caused the run. The Regulators did not have time to assist and broker a merger to save the bank. They have done this in the past and because of the run not deal could be made. He is the cause.

[Robert Mack]

"Do you have a right to know the bank is on the watch list."

Dah.....well let me see if I can explain this. I sometimes think that most people can apply simple logic to a statement without the author needing to explain the 'in betweens' in detail.

The watch list is publically available for those who want to see it....I'm sure.
If not, do your own research just like I did when I passed on investing in IndyMac.

If you want to find out which Fortune 100 companies are in trouble...it's available...A countries G.N.P. ...it's available...etc. etc. etc. Now if you're thinking the watch list should be mailed to your house and to your attention......that's not going to happen.

However, when a member of the U.S. Senate Banking Committee tells the entire world that a bank is set to go under ....what do you think typically happens?

Ddn't you ever see IT'S A WONDERFUL WORLD?

[jessi smith]

On http://www.cnn.com/2008/POLITICS/07/13/indymac.schumer/?iref=mpstoryview

"In a Sunday news conference, Schumer said everything in his letter was already known to the public."

If it was already known to the public, what is the reason for his public letter? It is contradict to what he said previouly :"I just bring private message to the public. Do not kill the messanger." What a great liar from time to time!

[Ralph]

Schumer is a certified crook. It is like the wild west out here what these guys can get away with. The FED stepped in and did a taxpayer bailout of Bear Sterns. The reason was to save all the powerful and connected investment banks like Goldman Sachs, Merryl Lynch, Lehman Bros, JP Morgam, so that their stocks did not tank. So the government steps up to bail out one group of banks that it recognizes are just a house of cards and would all tumble if investor confidance was shaken. Then the government steps up to deliberately shake confidance and cause a run on another bank. This is not the free market. This is what happens when banking is made into a monopoly run by the government. Schumer insinuated that the FDIC would not be able to cover Indymacs deposits causing 1.3 billion to be withdrawn in a week. Before that they were better capitalized then many other banks out there. If the FDIC cannot cover deposits they have promised too then ALL banks would go under in the same manner indymac did.

The government obviously knows that banks will fail if there is a run on them, this is why FDIC insurance is in place. Schumer is trying to play dumb that he did not realize this. Schumer may be a criminal and highlky unethical, but I have never heard any accuse him of being stupid. The man is known for a sharp intellect and he serves on the banking committee. So I don't think his 'stupid defense' is going to fly very well with anyone. He needs to be investigated.

[Jim Riley]

You are missing the real story. That grease ball Shumer or one of his relatives probably sold IndyMac short before he made the statement. Bin Laden did the same thing in the stock market before 9/11. Maybe we should have a congressional investigation - LOL.

[JenniferK]

All of the comments from people who think it is "bad" that the public knows a bank is insolvent are (1) wrong and (2) only looking at half the story.

Imagine you own a small company with an average bank balance of $400,000. Assume that loss of $300,000 would force your company to close, and thereby make 10 people lose their jobs.

Wouldn't you want some advance warning that your company's bank was going to fail, and that your 10 employees might lose their jobs?

Wouldn't you move your money to save your employees' jobs and your company's future?

Of course you would.

The secrecy surrounding bank and S&L failures in the 1980's caused job losses in the thousands, because some employers did not know their bank's failure was coming.

It is unconscionable that the FDIC, OTS and Fed game the banking system by keeping depositors in the dark. Basic transparency is essential to allow companies to protect their futures and their employees' jobs.

A "bank run" is not immoral or illegal. It is the essence of prudence.

I expect that those of you readers insisting on bank rating secrecy would not eat at a restaurant publicly rated "C" or "D". Then why would you want to your money, your employer's, or your family members' to stay in a bank SECRETLY rated "C" or "D"?

[jackson hill]

New York Times reported that hedge fund managers have a new champion in their effort to keep legally dodging the taxes the rest of us pay: none other than New York Senator Charles Schumer. Now you know who is Schumer's friend and why he caused the bank run on Indymac. He truly support hedge fund and private equity because they truly support him.

http://www.nytimes.com/2007/07/30/washington/30schumer.html?_r=1&oref=slogin

"Large Investor decided to pay a few bucks to a Senator in New York to force the issue."(Prospect Mortgage Backed By Sterling Fund--Private Equity Acquired The Mortgage Branches from Indymac before FDIC takeover)
http://www.housingwire.com/2008/07/03/regulators-to-schumer-weve-got-a-whole-bag-of-shhh-with-your-name-on-it/

"And do remember that there are many investment bankers located in New York, making them pretty influential constituents of Sen. Schumer."
http://www.pasadenastarnews.com/opinions/ci_9783402

"In a Sunday news conference, he said everything in his letter was already known to the public."
If it was already known to the public, what is the reason for his public letter? It is contradict to what he said previouly :"I just bring private message to the public. Do not kill the messanger." What a great liar from time to time!
http://www.cnn.com/2008/POLITICS/07/13/indymac.schumer/?iref=mpstoryview

[fran]

Why not give depositors a 72-hr heads up? That would have made some sense. Schumer is about as a good a grandstander as Sptizer .

[Jim]

Schmucky Schumer at it again.....this guy is going to prison one day, it's only a matter of when, not if.

[calvin]

schumer?????????? i think i can call him mr stupid , cause he make the depositor run to the bank to cash out all the money and make indymac fall. he has no power to say that in public. if he has any concern he should contact FDIC not to ask the public .he dont work in the bank and he dont know anythings about hows indymac running their bussiness. now please ! what is the second bank to fall now???i think you are not helping at all......mr schumer please stay home or not to say anythings to the public..thanks to you......xxxxx

[matt carl]

Schumer likes a reptile, change his skin and color from time to time. Even on his said statement. Liar and Rumor Creator! Criminal!
http://www.blogrunner.com/snapshot/D/2/0/46E4848C006B7720/

[jason smith]

Schumer has loudly promoted for months, that Fannie Mae and Freddie Mac should ide to the rescue of the housing market by buying up unwanted mortgages and guaranteeing them. (So his friend at hedge fund and private equity could take benefit from this).

http://online.wsj.com/article/SB119552028786998586.html?mod=Review-Outlook-US

[martscan]

As a depositor and losing stockholder of IMB ($0.1350 last), I am sick and tired of the anti-Schumer, anti-Wall Street, anti-everything, conspiracy freaks that know nothing of our financial system, let alone the banking industry. For all you 'experts' out there, no one is holding a gun to your head to 'do' anything, and if you are all so knowledgeable and smart you must be rolling in dough from shorting this market. I am.

[martscan]

Dumb, stupid, spiteful, wrong, mean, ignorant:

Bob C., Get Real, David, John Smith, Greg L., Oscar, Horst, Robert Mack, Tony Wong, Jessie Smith, Ralph, jackson hill, Fran, Calvin, Jason Smith.

Intelligent, aware, knowledgeable, right, understanding, bright::

William R. Bauer, Bart, Andre, Chris Johnson, JenniferK.

[Randell Young]

Any Senator, anytime, can cause a run on any bank doing just exactly what Senator Schumer did. All banks work on margins. They don't have every depositor's cash sitting there in the vault dead money.

Just a word to the wise. These are the compassionate, ethical, effective government Democrats who have managed, by their no-drill, no-nukes, no-coal policy to double the price of crude oil in the two years since they took control of Congress.

And what has happened to the stock market since the Democrats, promising to raise marginal income and capital gains tax rates, have taken the lead in the polls?

Wise up. Socialism doesn't work. It's just a way of using the power of the government to steal. And everybody, including the so-called poor, pay the price.

[nytfmt]

Schumer is despicable. He yelled FIRE in a crowded theater and the panic ensued. Schumer should be censured and made to pay for the losses to IndyMac.

[Greg]

What Schumer did was wrong! Anyone who says otherwise is a partisan. THE RIGHT THING FOR HIM TO DO WOULD HAVE BEEN TO CALL THESE BANKS OUT FIVE YEARS AGO. I understood this problem then. Schumer is either dumb or evil.

[M.L. Miller]

Can anyone tell me if there were other banks that Senator Schumer could have referenced with similar or even worse situations than Indymac was experiencing? Was Indymac truly the "outlier" as Schumer claims or was it a convenient "sacrificial lamb" used by Schumer to draw attention to the problem? Unless Indymac was really the worst of the worst, I believe there were other measures Schumer could have taken to lead to a solution to this crisis that would have saved the employees, the customers and the taxpayers a lot of heartache, headaches and money. Curious in New England

[hahaha]

he didn't yell "FIRE" in a crowded theater, he yelled "FIRE" in a burning building. sheesh. I'm not his biggest fan, but the Bush/Clinton/Bush years have made us so cynical and brainwashed that the act of telling the truth is now a cause for tarring and feathering

[Art Marriott, Seattle]

So Schumer picked up some of the accumulating manure and tossed it into the fan. The problem wasn't him...the pile has been growing so fast we're all up to our necks in it. The results of years of Republican negligence and incompetence have come upon the nation like a runaway freight train, and asking everyone not to talk about it only means we'd get run down in silence.

These dollar-worshipping zealots and their gullible supporters have been chipping away for years at the safeguards that were put in place after the Great Depression to keep it from happening again. Now we're seeing the sorry result.

[rts]

I would bet Schumer (or one of his friends or family) sold Indymac short so he could profit from it. To bad the media won't investigate to find out.

[Phil]

I see this as Schumer's legacy -- Schumer's Run

[GOJim Townes]

"These banks and brokers that were giving out half a million dollar loans to people that had no business getting them are the ones to blame."

The emperor ISN'T wearing any clothes so WHY NOT say so? Stop killing the messenger.

Now for more chilling news.......

Court Backs Bush on Military Detentions
By Adam Liptak

President Bush has the legal power to order the indefinite military detentions of
civilians captured in the United States, the federal appeals court in Richmond,
Va., ruled on Tuesday in a fractured 5-to-4 decision.

www.informationclearinghouse.info/article20288.htm

“This decision means the president can pick up any person in the country — citizen or legal resident — and lock them up for years without the most basic safeguard in the Constitution, the right to a criminal trial,”

Look out Senator.....

[Ann]

Schumer's time has come to be on the other side on the investigative table. SENATE MUST INVESTIGATE CHARLES SCHUMER'S INAPPROPRIATE BEHAVIOR.
SCHUMER CAUSES RUN ON BANK.
LAWS AGAINST YELLING "FIRE" IN THEATERS, SCHUMER.
SCHUMER MUST STAND FOR AN INVESTIGATIONS.

[Bry]

these comments are missing the point. Indymac was Not on the FDIC watch list. It is Not a new york bank. Surely the Sentor doesn't just examine random bank balance sheets in his leisure time. The appropriate question is who asked Sen. Schumer to write an alarming letter at an alarming time (late June 2008). Which friend or contributor to Sen. Schumer had an outstanding short position on Indymac, and made a killing at the expense of despositors and taxpayers. That's the question to be answered.

LA Times sunday, has an article on Indymac that doesn't even mention Schumer, the reporter should be asked why? the article makes the outragous claim the these kind of bank runs are normal.

[martscan]

Bry:

You obviously haven't read all the comments.

Ann:

What do you suggest someone yell when the theater IS on fire?

[William Newman]

The bank was corrupt and the regulators did not do their job - So what does Schumer have to do witth the underlying problem?

[Brad]

Seriously, those of you blaming Bush for the bank failures haven't done much research. It's a failure on the part of both parties over the past 15 years. Your government - especially your Congress - suck at their jobs. But you never vote the bums out.
If Washington is corrupt, it's the voters' fault. Every 2 years you've got the chance to remove these people from power, and every 2 years the same people get elected.

[Tim]

Can't wait until this blabber mouth is behind bars.

[Michael]

By all the preceding comments you would think that the collapse of the American finacial institutions were a result of a shadow government. They are hard at work, opening up the borders, letting illegals bankrupt the American entitlements, buying houses with taxpayers money, buying their illegal votes to keep their cohorts in office/power. Next you'll have us believe that obama is not a natural born American, that he had his grandmother taken out to keep the secret, that all the liberal states have a printing press to have had 600,000 illegal votes made for obama, putting him over the top of another liberal mccain, that it was the liberals who gave us mccain, trying to get a repeat election of dole/kemp, that the American election system is broken and has been since the 40s, and that obama will wave his arms the first week in office and this financial collapse will just disappear, that obama is going to jack up the fed taxes on gas to 3.50 to 5.00 a gallon, that 5 million new jobs will just appear out of no-where, and he will pay your motgage payment, and pay your gas credit card every month. Global warming will go away after Americans agree to be taxed into oblivion by the u.n. with kyoto protocol II, that there will be a one world order, and the leader will be so charismatic that people will be willing to praise him as god, no matter how evil or inept he will be. Americans would never buy a fairey tale would they? Good luck with that, fairy tales!!!! You hear about the big CHANGE, you see nothing more than the same old, clinton loosers, the people who created this mess, the corrupt, the inmates have now been put in full charge, getting rich off of hard working Americans, BLAME BUSH, when he's gone, who do you blame? Four years from January 20th, 2009, let's see who you blame, lies are likes turds in a punch bowl thay always rise to the surface. You all bought the biggest lie, hoax ever perpetrated on the American voter, you just squandered 4 years that this country could have healed, now it will be 25 years.

[Jerry]

This was all the fault of Mr. Bush. It was his fault that the economy tanked, it is his fault the auto companies are in such trouble, it's his fault that the housing market is in complete ruin, it is his fault that we are hated in the world, it is his fault that we have spent so much in Iraq. It is even his fault for Katrina, the horrible winter weather we have had, it's his fault that we have global warming, it's his fault that the Detroit Lions have gone 0-15. It's all his fault! None of our problems have ben caused by Mr. Shumer, Frank, Reid, Peloesi, Dodd, and all these other misfits. You Democrats are too STUPID to face the facts that YOUR congress has put us in the mess that we are currently in. You all blame the President and glowingly talk about the President's approval rating but look at the approval rating of the Congress----it's flat-line!. When it's all said and done and years down the road Mr.Bush will be seen as not such a bad President as some of you egg-heads think. When is the last time we have had a terrorist act on this soil? He has kept us safe and protected every single one of us and that includes the sorry hides of stupid democrats that do not have a clue. Sorry to say I bet in 8 years the next President will not be able to say that. The democrats will do everything they can to weaken every single one of our defences. As for Mr. Shumer? The guy is a complete piece of trash always has been and always will be. He is both stupid and calculating with what he does and what he did to Indymac is criminal and some of you idiots are saying that he spoke up and told the truth. Complete B-S! I am quite sure that if Indymac was in the state of New York Mr.Shumer would not be saying a word he would be covering it up as he does with much of the dirty deals he is into on a daily basis. These guys will do anything to get their face in front of the camera or their voice heard on radio so they can make a name for themselves. Well Mr. Shumer has succeeded again in making a name for himself but not sure this is the forum for such words. If he told the truth then he would say how many in Congress were the direct cause to FreddieMac/Fannie Mae, he would confess to a Democrat Congress paving the way to all these home loans to people that could not afford them. My prayer is that what goes around comes around and Mr.Shumer and his band of misfits will one day be exposed for the dirty underhanded deals they have made all along the way. But that could be done right now but democrats are TOO STUPID to do the right thing---and besides it's all Mr. Bush's fault. Sounds like a bunch of kids playing ball in the street and someone breaks a window. The ones that are quickest and loudest to put blame on others are the ones to watch.

[Nomarchy]

I suppose the fact that he's been vindicated by the Treasury Department's own Inspector General's letter is 'fine print' to all the fine rightwing Republican ladies and gentlemen who are quick to criticize Sen. Schumer.

http://www.washingtonpost.com/wp-dyn/content/article/2008/12/22/AR2008122201301.html?hpid=topnews

[Reason]

to Nomarchy...

The article you linked does not vindicate Schumer. He acted and will continue to act in public office, selfishly. Schumer and Reid acted politically to create panic for an election.