Treasury report absolves Schumer in IndyMac collapse
Sen. Charles E. Schumer insisted last year that his surprisingly blunt public comments about IndyMac Bancorp weren't responsible for the Pasadena bank's failure.
In a report today on IndyMac’s collapse, the Treasury Department’s inspector general largely backs Schumer on that issue.
The New York Democrat on June 26 made public a letter he had 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."
When the OTS seized IndyMac on July 11, it specifically fingered Schumer in the bank’s demise, saying that "the immediate cause of the closing was a deposit run that began and continued" after Schumer went public with his concerns.
But the inspector general’s report says Schumer's letter just made clear to everyone else what the OTS and the FDIC already knew: that the bank was defunct.
"While the [deposit] run was a contributing factor in the timing of IndyMac’s demise, the underlying cause of the failure was the unsafe and unsound manner in which the thrift was operated," the report says.
Inspector General Eric Thorson told the Times: "We don't think the letter caused the failure. The bank was on its way going down already."
The OTS previously attempted to blame Schumer’s comments for scotching a deal that IndyMac was said to have been negotiating with potential investors to buy the bank. Those talks were going on weeks before the letter was released, the OTS said.
Darrel Dochow, who had been the Western regional director for the OTS, told the inspector general that "there were investors who were interested in investing in IndyMac" around the time of Schumer’s letter. Dochow asserted that "interest waned after the senator’s letter was published" and the run on deposits hit.
But the inspector general’s office said it checked on Dochow’s statement and talked with a principal at the investment firm that he had mentioned.
"Contrary to what OTS’ West Region director told us, the principal said that Sen. Schumer’s letter did not affect the firm’s investment decision," the report says.
-- William Heisel
Photo: Sen. Charles Schumer. Credit: J. Scott Applewhite / Associated Press