Friday, July 11, 2008

Senators, Banks, and IndyMac


If Senator Ted Kennedy got up in the Senate on Monday morning and said that "Barrack Obama is not a liberal, he is a conservative in liberal clothes, and I urge all Democratic electors to cast their vote for Hillary Clinton at the convention," the following morning Hillary would have enough Democratic electors to give her the nomination and not Obama. It would be close, but his voice would turn just enough.

If George Bush got up tomorrow and said that "Cheney really was the mastermind of 9/11," the next hour you would have nearly every liberal, Democrat, and conspiracist, certain beyond a doubt, now that Bush confirmed it.

Why does it matter what public figures say? or does it?

What if a Senator made a public statement to the effect that Bank of America was near bankruptcy and about to be taken over by the government. What do you think would happen to depositors and to Bank of America?

With certainty, many depositors would withdraw their funds, and it is possible enough of a drain would occur that the bank would come close to running on insufficient funds.

Then comes this story:

An important angle in the IndyMac failure that may get lost in ominous headlines tonight and tomorrow: federal regulators pointedly cited U.S. Sen. Charles Schumer, D-N.Y., in explaining the bank's failure. In simple language, federal regulators blamed Schumer for a run on the bank.

Here's from the press release issued by IndyMac's regulator, the Office of Thrift Supervision:

"The OTS has determined that the current institution, IndyMac Bank, is unlikely to be able to meet continued depositors’ demands in the normal course of business and is therefore in an unsafe and unsound condition. 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 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. "Although this institution was already in distress, I am troubled by any interference in the regulatory process."

Schumer's response? In an e-mail quoted by Bloomberg News, he says: "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 ... Instead of pointing false fingers of blame, OTS should start doing its job to prevent future IndyMacs.''



Make Mine Freedom - 1948

American Form of Government

Who's on First? Certainly isn't the Euro.