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."
Editor at Large
Comments Policy
Schumer
July 24, 2008 - 14:18 ET by iveseenitallSchumer had nothing to do with it. And the moon is made of green cheese!
NEVER,NEVER trust a "liberal"
Erin, honey, we don't give
July 24, 2008 - 14:20 ET by mattmErin, honey, we don't give a crap what you think. We want facts and the fact is, Schumer bad-mouthed Indy Mac and people fled...
Correlation doesn't prove causation, but it's certainly more reliable than the convoluted thought processes that migrate their dim way through your thick skull.
I am not sure what is more
July 24, 2008 - 14:24 ET by Darth DutchI am not sure what is more disturbing to me, the fact that Charles Schumer is getting a free pass and not getting nailed for his part in the run on the bank or the fact that Indymac was not on the federal government's radar as one of the banks that was in trouble.
Darth Dutch
Fed. Govt. wrong, Burnett right
July 24, 2008 - 14:28 ET by SickofLibsIf a senator isn't powerful enough to cause a run a bank, who the hell is? That would leave who, POTUS or the Fed Chairman?
Quite a grand pronouncement from someone with only a B.S. and very limited real world experience (kinda like someone else).
She's cute, that's about it.
I think a lot of the problem
July 24, 2008 - 14:31 ET by marvlI think a lot of the problem with the MSM is that it largely consists of female swimsuit models and male underwear models who are very pretty to look at, but who have a laboratory grade vacuum between their ears. There should be a law that persons named Erin or Heather or Amber, etc., etc., etc. can go for coffee and get the donuts, but cannot use the holes under their noses to express an on-the-air thought. Given such a law, just think how much more intelligent these bozos would appear.
Very Classy
July 24, 2008 - 20:19 ET by third eyeThere should be a law that persons named Erin or Heather or Amber,
etc., etc., etc. can go for coffee and get the donuts, but cannot use
the holes under their noses to express an on-the-air thought.
I take it you were a Hillary supporter.
Erin, Honey.....
July 24, 2008 - 14:40 ET by PurdueMattYou are on the air because you are pretty not because of your insightful analysis.
I'd like to hear the
July 24, 2008 - 14:41 ET by SickofLibsI'd like to hear the Messiah's take on this, as he heads the Senate Banking Committee.
Nah, I'm just kidding (not 'lying'). He IS head of the Subcommittee on European Affairs, which he chairs and has only convened once. Maybe some Euro-reporterette will ask him about that. Kinda sounds like he could give a crap about Europe.
This is strange
July 24, 2008 - 15:47 ET by serfer62The president is responsible for global warming, baby seal murders, low gas mileage in cars, accidental gun deaths
and
Schummer gets a pass!?!
Don't forget Katrina
July 24, 2008 - 16:18 ET by needleDon't forget Katrina
Impunitas semper ad deteriora invitat.
C'mon, it was only $125
July 24, 2008 - 16:56 ET by SickofLibsC'mon, it was only $125 BILLION
How can you put a price on a baby seal?
Senator Schumer...media lover!
July 24, 2008 - 15:57 ET by AmericanEnergistI commented on an article in the LA Times on July 14th that the OTS felt that the leak of the letter to the OTS and FDIC by Senator Schumer caused depositors to begin withdrawal of $1.3 billion in eleven days. The senator cried 'it wasn't me...I was only the whistleblower!'.
http://www.mccullagh...
Those of us in the NY Metro area know that the senator lusts for attention and having to play second fiddle to NY's junior senator irks him to no end. He has a pretty powerful committee positions for someone who was one of the biggest offenders in the House Bank Scandal. He wrote so many bad checks, I'd expect his name to be Senator Goodyear.
Senator, I don't have to remind you that words are powerful, and coming from a senior senator on the Banking Committee, they are amplified as well. You should temper you need for attention with responsibility to the citizens of this country for whom you work.
www.ArmchairEnergist...
Schumer may not be responsible...
July 24, 2008 - 16:10 ET by ThalpySchumer may not be responsible for the run on the bank, but it would be so gratifying to get to blame him for it.
Maybe so, and it's weird for me to defend Schumer, but...
July 25, 2008 - 09:29 ET by sarcasmoMight some tiny sliver of blame for this debacle belong to bank (mis)management, instead of a Democrat windbag getting 100% of the blame because he stated the obvious about a mismanaged bank? I suspect the real story here, which has yet to be revealed (and I haven't looked, either) will be found in the political contributions & lobbyist payments perpetrated by IndyMac's pointy-haired mismanagers. Will the news media do their jobs, commit a few acts of journalism, and look into the politics of said contributions/lobbying? I hope so, but I have yet to see it so-far in this scandal...
JMR
The tax & spend drug war looks racist in the real world.
NBC
July 24, 2008 - 16:10 ET by charlietexaslets see...............she works for NBC....she called Bush a monkey...........gee....ya think she's in the tank for the liberals???
I need to think about this........uuuummmmmmm
mom
Erin's no lefty gunslinger...
July 24, 2008 - 16:58 ET by trak65She has occasionally made silly remarks like the "monkey" reference, but also has been friendly toward Rush and disagreed with exaggerated doom-and-gloom talk about the economy. I think she should be allowed to opine as to whether Schumer did or didn't sink Indymac.
Schumer's ego more important than IndyMac depositors
July 24, 2008 - 18:27 ET by nkviking75I may be out of touch on such things, but a run on a bank seems to be a fairly rare occurence in my lifetime. Something really extraordinary must have happened to set it off. Something like a powerful senator speculating in public. Schumer's massive ego required him to get press attention by releasing the letter, when keeping it private would have been the more sensible thing to do.
When you put the clowns in charge, don't be surprised when a circus breaks out.
Do Schumer and Burnett meet
July 24, 2008 - 19:58 ET by d1carterDo Schumer and Burnett meet at hotels at 2:40 am? Just asking...
OTS
July 25, 2008 - 11:43 ET by j. frank wilsonis in complete CYA mode - this failure caught them with their pants around their collective ankles, and they are floundering, trying to blame everyone but themselves.
Banking is a highly regulated industry. Regulators are supposed to know the banks and thrifts in their portfolio. Proprietary banking rating companies realized in mid-2007 that Indymac was in very serious trouble. Why didn't OTS?
Read Kathleen Porter's excellent column in the July 24, 2008 issue of The San Francisco Chronicle. In May 2008 the FDIC issued their problem bank list press release. Indymac wasn't on the list. Many banks on that list don't fail - yet, according to Ms. Porter's column, "...96 percent of the banks that failed between 1990 and 2002 were first on the problem list, according to an FDIC study."
OTS and FDIC were asleep at the switch on this one. And, as Ms. Porter points out, if they couldn't anticipate Indymac's troubles (at least put them on the list) what does that say about their abilities to regulate? What other institutions are out there that are not on the list - but certainly should be receiving considerable extra examination?
Frank ???
July 25, 2008 - 12:25 ET by LionKingWho has oversight of the FDIC and OTS? In one way or another, Schumer is to blame.
LionKing:
July 25, 2008 - 14:49 ET by j. frank wilsonThat's not a stretch (let alone a reach) - that's flailing wildly.
There are twenty-one members of the Senate Banking Committee. Why is Sen. Schumer more responsible than any other one of them? If the FDIC and OTS can't do their job, that's their fault. Period.
The Bush Administration - with a Republican Congress for six years - did nothing to strengthen the regulatory oversite of the national banking system. Now the chickens have come home to roost. Just like they did when President Reagan deregulated the thrifts - after increasing deposit insurance to $100K per account. We all saw how well that one worked out! Well, here we go again...
frank
July 25, 2008 - 15:39 ET by LionKingAs a member of that committee, Schumer should act more responsibly when he is privy to sensitive information.
Typical blame game. Republicans were in control and now they are to blame. Did the DUMBocrats do anything or did they sit by idly?
So how do feel about the Clinton's Administration and all of the phony corporate earnings that created a FALSE economy during the 90's...do you remember the NASDAQ crash during the last year of Clinton? Seems to me the Bush admin had Clinton's mess to clean up...ever heard of the Sarbanes-Oxley Act?
LionKing:
July 25, 2008 - 16:05 ET by j. frank wilsonYou try to make a case that Sen. Schumer is responsible for the collapse of Indymac, then you accuse me of playing the blame game?
There are reports out today that a Southern California grand jury is investigating Indymac. Another sign the regulators were asleep at the switch.
Indymac's executives and Board are responsible for its failure. The regulators who should have been on the job clearly weren't. That's where the proper responsibility lies. These folks weren't up to the job. Obviously.
To try to blame all that on a single Senator is just silly. How many Alt A or subprime loans did Sen. Schumer approve?
J.frank, Just curious.
July 25, 2008 - 15:59 ET by mastersofdeceitJ.frank,
Just curious. What's your opinion on some of the massive bank mergers that took place in the 90's Wells Fargo/Norwest, Nationsbank/Bank of America, Chemical/Chase,
mastersofdeceit:
July 25, 2008 - 20:02 ET by j. frank wilsonIf banks and thrifts want to merge, let them merge. There is a ceiling on size (a % of national deposits that can be held by one bank) and I think that is a very good idea. Other than that, have at it! When banks get too large people start local community banks to fill in the gaps and provide what is missing. That part of the system appears to be working well. I don't think Indymac failed because it was too big. I think it failed because it was poorly managed. My Daddy always said, "There are a lot more banks than there are bankers."
Relatively few bank mergers (or any other M&A's, for that matter) actually make their numbers. I remember when Wells Fargo wrote off $400M in un-reconciled accounts after the merger with Norwest. Not that the funds were lost - they simply could not be accounted for. Very often the anticipated savings are never realized. And the pool of top management able to effectively run such huge enterprises is not particularly deep.
Obviously the jury is still out on Bank of American and Countrywide; and Wachovia and Golden West (World Savings).
It is very difficult to fully integrate systems and even loan documents in a major merger. Perhaps that is why there is only one truly national bank - BofA (I recently read, I believe in Portfolio Magazine, that BofA is the product of 3,000 acquisitions and mergers - that must be going back to when the Bank of Italy purchased Bank of America).
Why do you ask? And what do you think about it?