Federal regulators seized IndyMac today in the largest bank failure in decades. The FDIC will reopen IndyMac on Monday under its own control, keeping its $32 billion in assets while eating as much as $8 billion in losses. Guess what triggered the run on the bank that required FDIC intervention?
In a written statement, the Office of Thrift Supervision, which regulated IndyMac, said “the immediate cause” of the failure was statements made by Sen. Charles Schumer, a New York Democrat. Mr. Schumer in late June publicly raised concerns about the bank’s solvency.
“Although this institution was already in distress, I am troubled by any interference in the regulatory process,” said OTS Director John Reich.
Mr. Schumer couldn’t be immediately reached for comment.
Two weeks ago, Schumer publicly released a letter he had written to regulatory agencies, demanding action to prevent IndyMac’s collapse. Instead of shoring up the bank, the letter induced depositors to make a run on the bank. Within days, over $1.3 billion in deposits disappeared, forcing the FDIC to close the bank and pay off the insured deposits.
That move cost American taxpayers billions of dollars. Don’t forget to thank Uncle Chuck when you have a chance.