CNBC's Burnett Declares Schumer Not to Blame for IndyMac Failure
Don't blame Sen. Charles Schumer, D-N.Y., member of two influential banking committees - the Senate Finance Committee and the Committee on Banking, Housing, and Urban Affairs - for IndyMac's collapse, says CNBC's Erin Burnett.
Burnett, host of CNBC "Street Signs," disagreed with a claim by MSNBC "Morning Joe" host Joe Scarborough that a letter to regulators from Schumer caused a run on the beleaguered bank IndyMac, which eventually led to its failure and takeover by the Federal Deposit Insurance Corp.
"I don't think Chuck Schumer caused a run on the bank," Burnett said on MSNBC's July 24 "Morning Joe." "This is the new world of banking. Companies, banks come out and they say, and they say, ‘Oh my gosh - our stock's down 20 percent. It's being manipulated. Please come in and help us government. Oh my gosh, there's a run on our bank - let's blame it on a senator.'"
On June 26, Schumer sent letters to the Office of Thrift Supervision, the Federal Deposit Insurance Corp. and the Federal Home Loan Bank of San Francisco.
"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."
Burnett insisted Schumer isn't "powerful" enough to trigger panic about a stressed bank.
"Come on, Chuck Schumer wishes he was powerful enough as being able to cause a run on a bank," Burnett added. "IndyMac had serious problems and a lot of investors had recognized that. I don't like the finger-pointing - that's all I'm saying."
Perhaps the timing was coincidental, but what resulted after Schumer's letter was revealed by the media was a run on IndyMac. The federal government's Office of Thrift Supervision (OTS) placed the blame on Schumer in a July 11 press release.
"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 release stated. "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 in the release. "Although this institution was already in distress, I am troubled by any interference in the regulatory process."