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 .