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Why IndyMac failed July 17, 2008

Posted by tkcollier in Business, Economy & Business, Politics.
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The $4 Billion Senator – WSJ.com
The federal takeover of IndyMac Bank over the weekend could cost the Federal Deposit Insurance Corp. between $4 billion and $8 billion. But Senator Chuck Schumer, who helped to precipitate the collapse by publicizing a letter to the bank’s regulator last month, has no remorse.

The Office of Thrift Supervision (OTS), whose job it actually was to regulate IndyMac, took a different view. “The immediate cause of the closing,” the OTS wrote in a press release, “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 OTS added: “In the following 11 business days, depositors withdrew more than $1.3 billion from their accounts.” I’ve also heard that at the time IndyMac wasn’t even on the Fed’s Watch List of Banks that could fail.

From the LA Times quoting John M. Reich, director of the Office of Thrift Supervision:

Leaking his IndyMac letter to the press was reckless and grossly irresponsible. I don’t see how he can be trusted with confidential information in the future. What this incredibly stupid conduct does is put at risk the willingness of regulators to share any information with the [congressional] oversight committees. After this, you’d be crazy to share information with Schumer.”

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1. jeffsher63 - July 17, 2008

You can bet that Schmuck Shumer had an ulterior motive when he did that….


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