Indymac: Cuomo Shy About Saying 'Schumer'
We can debate the propriety of mentioning the name of banks that might be in financial trouble. But one thing appears clear to Chris Cuomo [file photo]: it would be wrong to mention the name of a Democrat who could be in hot water. Wouldn't want to cause a run on the Dem's political capital, after all. Cuomo's discretion was on display during today's Good Morning America. Anchoring in the absence of Diane Sawyer and Robin Roberts, Cuomo was discussing the run on Indymac and the advisability of publicizing the names of other banks that might be in trouble with ABC financial consultant Mellody Hobson.
CHRIS CUOMO: People are so desperate in markets right now that negative information that allows them to short-sell or bet on banks not doing well is very popular.View video [courtesy RedLasso] here.
MELLODY HOBSON: So I'm suspect about where the lists are coming from; the motives of some of the people putting the lists out here.
CUOMO: We saw the impact of panic not just on people but even in Congress, right? A senator gets up and says "I've heard something about a certain bank." It's in trouble the next day.
The senator whose name must not be pronounced is none other, of course, than Chuck Schumer (D-NY). And Schumer did much more than simply say "I've heard something" about Indymac. Here's how the Wall Street Journal describes his culpability:
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."Do you think Chris would have been so reticent had the senator in question been a Republican?
Mr. Schumer now argues that OTS was asleep at the switch, and that blaming him is like blaming "the fire on the guy who called 911." In fact, it's blaming the guy who poured on the gasoline. Very few banks, if any, would remain standing for long in the current tense financial environment after a Senator, in effect, told its depositors to run for the exits. In the 1930s, such tipsters were derided as rumormongers and often faced indictment for encouraging depositors to stampede banks.
Only last week, the Securities and Exchange Commission announced an investigation into the role of rumor-peddlers in the run on Bear Stearns. We somehow doubt that Mr. Schumer will receive similar SEC scrutiny for his very similar role in bringing about a liquidity crisis at IndyMac. But he may be more deserving.