The Blog @ Spolitics

Schumer Breaks the Bank

by Heywood U. Reedmore -- July 11, 2008 at 6:01 pm | In No, Seriously |

As if banks didn’t have enough to be concerned about, now they have to worry about press-hungry senators causing a run on their deposits.  Today, IndyMac Bank became the second-largest financial institution in U.S. history to fail.  How did it happen?  According to the bank’s regulator:

“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 [that] … expressed concerns about IndyMac’s viability,” the agency said.

In the 11 business days following Schumer’s letter, depositors withdrew more than $1.3 billion from their accounts, the OTS said.

Schumer was concerned about a run on the bank… kind of like the one he caused.  Good job, Chuck.  In fact, on July 3rd, regulators sent a letter back to Schumer warning him that his actions could have unintended consequences and to keep his mouth shut.

But according to Schumer, it’s not his fault.   

“IndyMac’s troubles, just like Countrywide’s, were caused by practices that began and persisted over the last several years, not by anything that happened in the last few days,” the senator said in a statement.

Troubles?  Sure.  But its failure?  No, that was caused by panic-stricken customers rushing to take their money out.  Which was caused by a certain senator who wanted to get his name in the papers.  After all, Chuck could have written the letter without making it public.  Schumer goes on to say:

“If OTS [Indymac’s regulator] 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…” 

Since he’s only brought this up recently, one must assume Schumer’s letter was designed to give OTS the power to go back in time to 2006 and stop Indymac from issuing the loans that Wall Street was gobbling up. 

After hearing Schumer’s pathetic response, one gets the image of Bart Simpson standing on stage amidst a collapsed set whining, “I didn’t do it.”  Only in this case, no one’s laughing.

Update: Link to LA Times article added.