TONY SNOW (June 1, 1955 - July 12, 2008)
More California Stupidity: The Senate fox guarding the henhouse!

Schmuck Schumer helps kill IndyMac Bank

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This story could be titled how a far-left liberal New York Senator will do or say anything to destroy the American economy – if it can be blamed on the Bush Administration.

Even the Office of Thrift Supervision which was forced to declare California’s IndyMac Bank insolvent and turned operational control over to the FDIC (Federal Deposit Insurance Corporation), cited Schumer’s partial responsibility for the bank’s failure.

The Office of Thrift Supervision (OTS) today closed the $32 billion IndyMac Bank, headquartered in Pasadena, California, and transferred operations to the Federal Deposit Insurance Corporation (FDIC).

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.”

IndyMac is the largest OTS-regulated thrift ever to fail and, according to FDIC data, the second largest financial institution to close in U.S. history.

Consequences of Schumer’s actions …

  • Deposit inflows in the three days prior to June 27, 2008: $31.2 million as matched against Deposit outflows beginning June 27, 2008: $730.2 million through July 7 and $1.3 billion through July 10
  • The pressure on IndyMac required time to be relieved. Negative news coverage and a subsequent deposit run beginning on June 27, 2008 took that time away. The deposit run followed the release of a letter from Senator Charles Schumer to the FDIC and OTS on June 26, 2008. The letter outlined the Senator’s concerns with IndyMac. The institution did not have sufficient access to liquidity to withstand the deposit run.
  • With insufficient liquidity to meet its obligations, and no viable alternatives to return to profitability and restore capital adequacy, IndyMac was in an unsafe and unsound condition to transact business.
  • OTS placed IndyMac into receivership, formed a newly chartered thrift, and named the FDIC as conservator for the new thrift, called IndyMac Federal Bank, FSB.

Schumer fires back …

According to Reuters

“Sen. Charles Schumer on Friday blamed IndyMac Bancorp Inc's failure on its main regulator, the Office of Thrift Supervision, and said it should start doing its job.”

"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," said Schumer, a Democrat from New York. "OTS should start doing its job to prevent future IndyMacs."

Bottom line …

More people will encounter the sting of unemployment, the FDIC estimates that it will cost the FDIC insurance fund between $4-$8 BILLION out of its reserves and a situation which may have been resolved quietly with little or no loss turned into a “bank run” fiasco. All because Chuck Schumer wanted to see his name in print one more time.

Who is Schmuck Schumer?

Rabid Partisan …

“Senator Charles E. Schumer, a Democrat from New York, is considered one of Washington's fiercest political practitioners.”

“In the Senate, Mr. Schumer has distinguished himself governmentally as one of President Bush's harshest critics. For example, as a member of the Judiciary Committee, he pushed Democrats to use an extreme legislative tactic, the filibuster, to block some of the Bush administration nominees for federal judgeships.”

Media Whore …

“Mr. Schumer's thirst for publicity has become the stuff of playful banter. He once prompted a colleague to assert that the ‘the most dangerous place in Washington is between Charles Schumer and a television camera.’"

“Even before arriving in the Senate, Mr. Schumer stood out for his aggressive tactics. As a member of the House of Representatives, where his district included parts of Brooklyn and Queens, he became well-known with weekly Sunday news conferences intended to generate headlines on what are normally slow news days.”

Proving he knows better …

Here are Chuck Schumer’s comments about the recent failure of New York brokerage house   Bear Stearns  …

“What we're in here is the closest thing we've seen to a bank panic since the Depression,” said Senate Banking Committee Chairman Charles Schumer, D-N.Y. “It's with investment banks, it's with larger investors. But it's the exact same thing. Confidence is so important. The quality of the asset matters less than confidence, and hopefully this move will restore confidence when it comes to some of these other firms." <Source>

And this really boosted the confidence of IndyMac depositors …

According to the Wall Street Journal

“Sen. Charles Schumer (D., N.Y.) sent letters to federal regulators asking them to more closely monitor the financial health of IndyMac, the thrift operator based in Pasadena, Calif. Sen. Schumer wrote that he is ‘concerned that IndyMac's financial deterioration poses significant risks to both taxpayers and borrowers and that the regulatory community may not be prepared to take measures that would help prevent the collapse of IndyMac or minimize the damage should such a failure occur.’"

“The letters, drafts of which were viewed by The Wall Street Journal, were sent Thursday to the Federal Deposit Insurance Corp. and the Office of Thrift Supervision, which regulate IndyMac, as well as to the Federal Housing Finance Board. The finance board regulates the 12 regional Federal Home Loan Banks, which are owned by banks and thrifts but chartered by Congress.”

A polite “shut up” …

Even John M. Reich, the director of the Office of Thrift Supervision cautioned Schumer about his pronouncements.

"As a regulator of insured depository institutions, we do not publicly comment on the financial condition or supervisory activities related to open and operating institutions," Reich wrote. "We believe it is critically important to maintain the confidentiality of examination and supervision information."

He went on: "Dissemination of incomplete or erroneous information can erode public confidence, mislead depositors and investors, and cause unintended consequences, including depositor runs and panic stock trades. Rumors and innuendo cause damage to financial institutions that might not occur otherwise and these concerns drive our strict policy of privacy."

This isn’t the first time that Schumer has tried to interfere with a financial institution for publicity reasons …

On November 26, 2007, Schumer sent a letter  to Ronald A. Rosenfeld who is the Chairman of the Federal Housing Finance Board. A portion of that publicly-released letter reads …

“I write to express my serious concern over the lending practices of the Federal Home Loan Bank of Atlanta, specifically in regard to the significant volume of advances made to Countrywide Bank. I am concerned that the loans being pledged by Countrywide to secure these advances may pose a risk to the safety and soundness of the FHLB system as a whole. I urge you to conduct a careful review of FHLB Atlanta’s collateral evaluation policies, as well as Countrywide’s pledged collateral, in an effort to determine the risk that Countrywide’s collateral poses to the FHLB system. During the current market crisis, it is important that the FHLB system perform its critical mission safely without imposing additional risks on an already strained market.”

Perhaps Schumer’s actions were not so innocent?

According to an industry publication, HousingWire, which offers financial insight to the mortgage industry…

“Our industry sources have gone so far as to suggest that Schumer was paid off to leak the letter to the press, although it’s unclear if the suggestion is anything more than idle speculation. The conspiracy theory goes like this: IndyMac has been privately negotiating for new capital for at least the last few months, and a Large Investor offered a deal that CEO Michael Perry balked at; Large Investor decided to pay a few bucks to a Senator in New York to force the issue.”

“We’re no conspiracy theorists at HW, but nothing on Capitol Hill would surprise us right about now.”

What should happen to Schumer …

First, he should be stripped of all committee assignments which deal with financial matters. He has proven himself to be reckless, grossly irresponsible and untrustworthy. Is it any wonder that any of the Administrative Agencies and regulators are reluctant to share confidential information with members of Congress?

Second, he should be publicly censured for this stunning breach of common sense which led to hundreds of people losing their jobs, a potential loss of billions of dollars and an impression of the Senate that they wholeheartedly deserve their 9% public confidence rating – which is lower than the President’s rating.

And third, there should be a formal investigation opened by the FBI to investigate rumors which were published in at least one industry publication alluding to the possibility that Schumer received some form of compensation for writing or leaking the damaging letters.

What can YOU do?

New Yorker’s Do not re-elect Chuck Schumer to the Senate as he cannot apparently be trusted with confidential or critical information in sight of a media reporter and has the common sense of the democrat donkey.

Vote for people who do not damage the people’s trust and bring shame on our nation’s congress.

Keep elected terms short so miscreants like Schumer have a smaller timeframe in which to wreak havoc on the nation.

Do not vote for any candidate or current politician who is willing to subvert the safety, security, sovereignty and economic strength of the United States or limit an individual's right of self-defense for their personal philosophy, power, prestige or profits.

-- steve

Quote of the Day: “I'm not upset that you lied to me, I'm upset that from now on I can't believe you” --  Friedrich Nietzsche

A reminder from a large improvement can result from a small change…

The object in life is not to be on the side of the majority, but to escape finding oneself in the ranks of the insane. -- Marcus Aurelius

Reference Links:

Announcement & IndyMac Fact Sheet|OTS

Chuck Schumer|New York Times

IndyMac Shares Drop-off Causes Alarm|Wall Street Journal

Regulators to Schumer: We’ve got a Whole Bag of Shhh With Your Name on It|HousingWire

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