With approval at 9%, Democrats decide to touch off bank run

Believing Congress' approval rate might hit double digits, Senator Chuck "The Camera Hunter" Schumer decided to bill taxpayers tens of billions of dollars by starting a bank run.

The run on the bank came after a critical letter about the bank from Senator Charles E. Schumer, Democrat of New York. Federal regulators said on Friday that Mr. Schumer’s letter had prompted the collapse by causing the run and scaring away potential acquirers.

“The senator made comments in his letter questioning the viability of the institution,” John M. Reich, director of the Office of Thrift Supervision, said in a phone call with reporters. “When a member of the United States Senate makes such a statement, it frightens depositors.”

In the days after Mr. Schumer’s letter was released on June 26, IndyMac customers withdrew an average of $100 million a day from the bank, or a total of $1.3 billion, the government said. Before Mr. Schumer’s letter, the bank had been receiving net inflows of money from depositors, Mr. Reich said.

Always willing to accept responsibility, the Democratic Senator denied he had anything -- anything at all -- to do with the bank run.

Mr. Schumer quickly fired back [stating,] "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."

Shw-w-w-w-w-w-weeeeeeeeen! Err, that was supposed to be a "tape rewind" noise (you know how hard it is to do sound effects in the blogosphere).

Anyhow, let's just use super-secret advanced technology to find out what really happened.

• 6/27/08 Los Angeles Times: Sen. Schumer calls for scrutiny of IndyMac's financial health:

"I am concerned that IndyMac's financial deterioration poses significant risks to both taxpayers and borrowers," Schumer wrote. The bank "could face a failure if prescriptive measures are not taken quickly."

• 6/27/08 Insurance News Net: Senator Asks Regulators To Probe The Financial Health of IndyMac :

[Schumer, the] chairman of the congressional Joint Economic Committee asked U.S. regulators Thursday to scrutinize the financial health of Pasadena-based IndyMac Bancorp Inc. and suggested that the mortgage lender might be on the brink of failure.

• 7/1/08 Forbes: IndyMac reassures customers after Schumer letter:

IndyMac Bancorp Inc. said it is working with regulators to "further improve" its safety and soundness after a senator's letter last week raised concerns that the bank could collapse... The Pasadena, Calif.-based mortgage lender said Monday that the letter, by Sen. Charles Schumer, D-N.Y., gave "the wrong impression" on several issues.

Depositors withdrew about $100 million from the bank in the wake of Schumer's letter, company spokesman Grove Nichols said in a prepared statement. The withdrawals are equivalent to one-half of 1 percent of the bank's deposits, he said.

• 7/1/08 Housing Wire: IndyMac: Mini Bank Run, Thanks to Schumer:

“As a result of Sen. Schumer making his letters public and the resulting press coverage, we did experience elevated customer inquiries and withdrawals in our branch network last Friday and on Saturday of roughly $100 million, about ½ of 1% of total deposits,” the bank said.

• 7/2/08 Housing Wire: Consumer Group Targets IndyMac Over Alt-A Mortgages:

As if IndyMac Bancorp Inc. didn’t have enough problems of the real variety right now — trying to find sources of capital among them, as bank losses tied to Alt-A mortgages mount — the Center for Responsible Lending on Monday took aim at what many expect to be the next target for consumer groups’ ire, now that Countrywide Financial is no more.

The CRL’s latest report, “Indymac: What Went Wrong?”, claims that the thrift “put itself in a hole by engaging in unsound and abusive lending during the nation’s mortgage boom.” The report was released on the heels of a leaked letter from Sen. Charles Schumer (D-NY) to bank regulators last week that questioned the bank’s financial footing amid growing losses.

• 7/2/08 Mainstreet: Is Your California Bank Financially Safe?

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Just how much has the Democratic Congress cost taxpayers? No more than usual, I suppose.


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