Posted on 07/12/2008 3:08:39 PM PDT by upchuck
The $32 billion failure of U.S. mortgage lender IndyMac demonstrates just how differently the United States is governed than Canada. This from today’s Wall Street Journal:
Mr. Schumer quickly fired back.The director of the Office of Thrift Supervision, John Reich, blamed IndyMac’s failure on comments made in late June by Sen. Charles Schumer (D., N.Y.), who sent a letter to the regulator raising concerns about the bank’s solvency. In the following 11 days, spooked depositors withdrew a total of $1.3 billion. Mr. Reich said Sen. Schumer gave the bank a “heart attack.”
“Would the institution have failed without the deposit run?” Mr. Reich asked reporters. “We’ll never know the answer to that question.”
“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,” Sen. Schumer said. “Instead of pointing false fingers of blame, OTS should start doing its job to prevent future IndyMacs.”
You might be asking yourself, why is a New York Senator asking a regulator to look into a California bank’s “solvency”? Sen. Shumer is a member of multiple committees, each of which gives him a call on the financial markets and banking sector: Banking, Housing and Urban Affairs & Finance are two of his key Senate committees. He also Chairs the Senate Subcommittees on Economic Policy (Banking).
Having established that he has an oversight interest in the banking world, just what is he doing writing letters that could be seen to encourage panic on the part of depositors? When his staff sat around and discussed what to do before the letter was issued, they would have discussed the obvious risks to IndyMac’s solvency if a key U.S. Senator was raising concerns about solvency. At the same time, others would have advocated that “he has to be ahead of the issue” and “on the record” before Indymac hits the wall.
It’s not like Americans haven’t lived through a year of warnings (see prior post “US subprime borrowers sink deeper into trouble” June 15-07) about the financial health of small to mid-sized U.S. financial institutions. Many Californians lined up last summer to get their savings out of Countrywide Financial (CFC), for example (see prior post “Has the run started at Countrywide?” August 18-07). Moreover, Sen. Shumer’s anger appeared to be directed at the Office for Thrift Supervision, as much as it was at IndyMac’s management. I’m not sure that five votes in New York State tilt on whether or not Sen. Shumer was “out in front” on this issue or not. His profile is so high, and his power to get projects passed for N.Y. so clear, that his Senate seat is likely in the bag for several terms to come.
Which makes it all the more interesting that he got into the details of this specific situation. It appears to me that he was just doing his job. Which is probably more than you can say, as an outsider, for the Office of Thrift Supervision [OTS].
If the SEC continues to be AWOL on most of its mandate, and the OTS can’t help its charges avoid insolvency, huge corners of the U.S. capital markets fall to those members of Congress who are prepared to take the baton.
Here are some more recent threads about how the Senior Senator from New York destroyed a bank:
http://www.freerepublic.com/focus/f-news/2044490/posts
http://www.freerepublic.com/focus/f-bloggers/2044299/posts
http://www.freerepublic.com/focus/f-bloggers/2044299/posts
http://www.freerepublic.com/focus/f-news/2044226/posts
Schumer needs to be investigated big time about this. Especially why he singled out IndyMac.
He is truly a scumbag!
P-U-T-Z
Look up Schumer in the dictionary, it's right next to the word scumbag!
bump
Some of you are much better at this than I am...
Can somebody determine if IndyMac has ever contributed to Schumer?
I’m betting not.
Being a muckety muck on banking this and banking that in the Senate, I expect the banks donate big time to him.
Just behind “microphone.”
How did a letter from Senator Schumer to the Office of Thrift Supervision ever become public? Someone had to bring it to a reporters’ attention, then explain to the reporter what the letter means, and then proofread what the reporter wrote down to ensure it is correct. Who did this?
he is between scumbag and schudenfrude
Theory 1: Schumer is the head of the Senate Democratic Campaign Committee. If he can show that he can destroy a bank by circulating a letter questioning its solvency, then he might expect that will lead to more campaign contributions from fearful financial institutions.
Theory 2: He believes he can increase Democrat gains in November by causing one or more banks to go under, producing more economic turmoil
Hate to say this boys, but the people who deregulated this industry are also responsible. The Financial Modernization of Act of 1999 which is called Gramm-Leach-Bliley which repealed the Glass-Steagall Act created all this nonsense with the Financial Industry we see today. That is more the reason than some premature words spoken by a foolish Senator. If this industry wasn’t allowed to run wild we wouldn’t have this situation now to even comment upon. Is it anyone’s surprise that Phil Gramm is in denial?
Regulators to Schumer on IndyMac: Please shut up
5:47 PM, July 2, 2008
Sen. Charles E. Schumer publicly taunted bank regulators last week about IndyMac Bancorp’s financial condition, which helped trigger a sudden outflow of deposits from the Pasadena thrift. Now the New York Democrat is getting some harsh blowback from one current and one former regulator.
Their message, distilled: Zip it, Chuck.
As noted here on Monday, Schumer sent letters to the Office of Thrift Supervision, the Federal Deposit Insurance Corp. and the Federal Home Loan Bank of San Francisco, saying he was “concerned that IndyMac’s financial deterioration poses significant risks to both taxpayers and borrowers.”
http://latimesblogs.latimes.com/money_co/2008/07/sen-charles-e-s.html
From what I have heard from news reports, this letter was circulated all over California, causing a run on the bank. An investigation should definitely be made as to how it became public and achieved such widespread circulation.
IndyMac has no PAC, its executives made no political contributions, and it does not even have a registered lobbyist in Washington. My guess is it was completely blindsided by Schumer. Whatever deals it may have been working on to line up new capital infusions or to sell any of its assets went right down the crapper, along with over a billion dollars in deposits that were withdrawn by panicked customers.
Oh please. If all it took was a comment from Chuck Schumer to bring down the bank then it was on it’s last leg to begin with. Schumer could have praised it to the skies and it would have failed anyway.
The author of the article quoted from the Wall Street Journal.
This is arrant nonsense being circulated by the DNC. Gramm-Leach-Bliley had NOTHING to do with the subprime mortgage boom or its bust. The blame for this mess lies with liberals who continually pressured banks to lend more and more money at easier and easier terms to poorer and poorer people. Also with state governments, most of which are controlled by Democrats, who refused to regulate mortgage brokers. The vast majority of the bad loans that are in foreclosure today were originated by largely unregulated mortgage brokers. IndyMac was a big player in the broker business. When you take unregulated people with no responsibility for the performance of the loan, then pay them commissions based on how high an interest rate you can sell them, it's a recipe for disaster.
Democrats have been in charge of Congress since January of 2007, yet they have not passed a single piece of legislation that could have reined in some of the worst lending practices. When Democrats ran the Senate in 2001, they didn't pass any such legislation either. Talk about people in denial!
Schumer is what he is, and I don’t agree with him on much of anything. But, he didn’t force IndyMac into FDIC receivership. They were already well on their way there before he opened his mouth.
Anybody have a link to those numbers and statements?
Non-Sequitur (reply 14) might be comforted.
According to the article, Schumer's spokesman said the release of the letter was done by his office deliberately:
"On Monday, Schumer aide Brian Fallon offered this explanation for Schumer's action: 'The home loan bank system has an obligation to lend responsibly and police its members. But it has not been doing its job. We have found the only way to get the home loan bank system to act appropriately and positively is to make public the concerns we've already expressed privately.'"
http://www.freerepublic.com/focus/f-news/2044490/posts
I also have a feeling that a left-wing activist group may have been behind this too, and may have been the one that leaked Schumer's letter to the media. IndyMac was apparently very naive about politics.
Last summer, Schumer sent letters to a whole bunch of big mortgage lenders demanding all sorts of information about their loan portfolios and servicing practices. I know many conmpanies responded and gave him the information. Perhaps IndyMac told him to get lost.
On June 30, a shadowy left-wing group called the Center For Responsible Lending published a nasty "report" on IndyMac which accused it of all sorts of abusive lending practices. You can read the report here. It's rare to see groups like this single out a lender for such a diatribe. My guess is that CRL tried to shake down IndyMac for money and IndyMac told them to shove it. CRL has filed 10 lawuits against IndyMac and much of the "evidence" in their report comes from bogus claims in its lawsuits.
CRL has close ties to many Democrats on Capitol Hill, especially Rep. Brad Miller of North Carolina. I had not been aware of any particluar ties between CRL and Schumer, but it would not surprise me. Schumer sent his letter to the bank regulators the same day that CRL released its report on IndyMac.
The Gramm-Leach-Bliley Act (GLB Act), also known as the Financial Modernization Act of 1999, is a federal law enacted in the United States to control the ways that financial institutions deal with the private information of individuals. The Act consists of three sections: The Financial Privacy Rule, which regulates the collection and disclosure of private financial information; the Safeguards Rule, which stipulates that financial institutions must implement security programs to protect such information; and the Pretexting provisions, which prohibit the practice of pretexting (accessing private information using false pretenses). The Act also requires financial institutions to give customers written privacy notices that explain their information-sharing practices.Source.
Sounds to me like it's mostly about privacy as opposed to letting greedy mortgage bankers run amuck.
And if the run continues...he will be responsible for the depression.
He was irresponsible in an already volatile market. To make public solvency statements in a nervous financial time is irresponsible. He cost investors money, he crashed a bank that may have been able to salvage itself, and he cost the taxpayer $$$$$$.
That is the first link I cited in my reply #1 above, as well as others.
Only a complete idiot would do what Schumer did.
Oh that’s nonsense, the bad business decisions led to the run on the bank.
I may be putting 2 and 2 together and getting 5 here, but it looks damn fishy to me.
Is there any way to punish Schuckster?
Agreed! Needs to be looked into.
I'm sure there is. But the RATS sure a hell won't do it and the pubbies don't have any balls, so there ya go.
This story needs to be hammered right through untill Monday so that it doesn't windup in the "Old News" pile.
Sen. Shumer is a member of multiple committees, each of which gives him a call on the financial markets and banking sector: Banking, Housing and Urban Affairs & Finance are two of his key Senate committees. He also Chairs the Senate Subcommittees on Economic Policy (Banking).
Ultimate goal is removal from office for a lack of public confidence.
I live for the day when Schumer has his Spitzer Moment and that smirk gets wiped-off his kisser...
Yes, Shumer may have exacerbated the problem, but he may have done so intentionally so Obama surrogates in the left-wing media can remind America of the “Keating Five”.
Hey, all I did was re-post what you did the legwork on FRiend, as did Sloop earlier today.
Anyone can make the argument that Schumer only stated what was going to inevitably happen to IndyMac but that overlooks the fact that Schumer made the decision to go public with private statements regarding IndyMac’s liquidity (as stated by Freeper BusterBear up at post #22), which is a highly irresponsible thing to do.
It’s easy for Schumer to play fast and loose with the financial security of millions of Americans, he’s got his, and he’ll ride his golden parachute out of the U.S. Senate at whatever time he decides is the ‘right time’ to retire. He’s a corrupt ‘Rat from New York, and his kind are seldom turned out of office because the voters who keep putting him back in there are quite frankly either just as corrupt as he is, or as stupid as a bag o’ hammers - take your pick.
What is needed, and what I doubt this current Justice Department is capable of, is an investigation into Schumer’s actions in this affair, and if there is evidence of wrong doing, Schumer should be frog marched out of his office and into the slammer at least until he makes bail. The Feds need to send a message to anyone, elected official or not, who seeks to trash talk a financial institution to the point where rumors take on the power of fact, and depositors start losing confidence in the banking system.
To some who don’t like the way our banking system works, that might sound almost appealing but they shouldn’t kid themselves: an economic collapse is exactly what our foreign enemies want, because in their minds it hastens the demise of the United States, and our domestic enemies likewise seek economic collapse (and I’m talking about Democrats here) because they see it as a guaranteed pathway back to controlling all three branches of government.
God help us if that happens.
Add one more item, though. If the Marxist 'Rats hadn't virtually forced many banks to engage in ''subprime'' (otherwise known as ''we know you ain't gettin' paid back, suckah, tough shjt'') lending, there'd be some tens of billions more capital available for this crunch...and not nearly so many badly weakened banks.
You would not have known about IndyMac but for its failure. Many of those who ran to that bank to make withdrawals were likewise panicked by information not previously known to them.
It is illegal for anyone to cause a run on a bank. In fact, there are laws against causing a run on any insured financial institution and Schumer could be prosecuted for divulging inside information which caused a bank to fail. Schumer had no business making public pronouncements about potential insolvency of any bank. Such statements have been proven historically to be self-fulfilling prophesies.
I think some Republican Senators need to demand an Ethics Committee hearing, at a minimum, and also demand thsat Schumer be removed from the Banking Committee. It would also be nice if some IndyMac shareholders and depositors filed a class action lawsuit against Schumer.
Among other things, GLB tore down the old Glass-Steagall ‘’wall’’ between investment and commercial banking, with one result being that we now have an orgy of speculation by investment banks using commercial banks’ funds (i.e. your and my deposits).
Republican Banking Committee Members
Richard C. Shelby Ranking Member (R-AL)
Robert F. Bennett (R-UT)
Wayne Allard (R-CO)
Michael B. Enzi (R-WY)
Chuck Hagel (R-NE)
Jim Bunning (R-KY)
Mike Crapo (R-ID)
Elizabeth Dole (R-NC)
Mel Martinez (R-FL)
Bob Corker (R-TN)
http://banking.senate.gov/public/index.cfm?FuseAction=Information.Membership
They can be contacted through their links on the site.
That’s a good idea about a Justice investigation. We should try to get some Republicans in the Senate or House to write to the AG and request an investigation. IndyMac was based in Pasadena - I don’t know who the Congressperson is for that area, but he or she might have some questions for Mr. Schumer! God knows Barbara Boxer and Dianne Feinstein won’t care about this, even as thousands of their constituents lose their jobs.
You might be asking yourself, why is a New York Senator asking a regulator to look into a California bank’s “solvency”?
Theory 1: Schumer is the head of the Senate Democratic Campaign Committee. If he can show that he can destroy a bank by circulating a letter questioning its solvency, then he might expect that will lead to more campaign contributions from fearful financial institutions.
Theory 2: He believes he can increase Democrat gains in November by causing one or more banks to go under, producing more economic turmoil
Possibility number three. A New York based bank swoops in to save the day and pick up the pieces. For pennies on the dollar I might add.
Maybe a bank from this list.
Chuck Schumer is Chairman of the Democratic Senatorial Campaign Committee. Take a look at some of the DSCC’s top donors so far :
Goldman Sachs $362,550
JPMorganChase $311,604
Morgan Stanley $169,450
Citigroup $146,250
Publicity.
On Friday, Mark Levin's producer put in a call to Schumer's office to try to get him on the show to answer questions. Larry Kudlow was all over Schumer on his show today. I expect Rush and Sean will be after him next week. His role has already been publicized in the Wall Street Journal and the NY Times (gasp).
Maybe after enough publicity, something real will be done.
Their rapidly declining stock price is available to all. I read several financial forums daily, and the condition of IMB has been the subject of much dire speculation, for several months.
Republicans need to stop circling the wagons because one of the main factors in this is the responsibility of Gramm. There's quite enough blame to go around, all the way back to the Clinton era. Clinton flunkies at Fannie Mae have a lot of explaining to do, too, not that they'll ever be called on the carpet.
There's another angle to this that I am working on and it's a lot more complicated. It involves ongoing efforts by the State of New York to assert regulatory authority over national banks. This would explain why Schumer went after IndyMac, and it also involves AG Andrew Cuomo going after Washiungton Mutual over its appraisal practices.
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