An important angle in the IndyMac failure that may get lost in ominous headlines tonight and tomorrow: federal regulators pointedly cited U.S. Sen. Charles Schumer, D-N.Y., in explaining the bank's failure. In simple language, federal regulators blamed Schumer for a run on the bank.
Here's from the press release issued by IndyMac's regulator, the Office of Thrift Supervision: "The OTS has determined that the current institution, IndyMac Bank, is unlikely to be able to meet continued depositorsí 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 IndyMacís 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."
Schumer's response? In
an e-mail quoted by Bloomberg News, he says: "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 ... Instead of pointing false fingers of blame,
OTS should start doing its job to prevent future