Nearly as much fun as a shoot-out at a wedding, the figurative handbags were flying at IndyMac’s (IMB) funeral Friday.
The director of the Office of Thrift Supervision, John Reich, blamed IndyMac’s failure on comments made in late June by Sen. Charles Schumer [D, NY], who sent a letter to the regulator raising concerns about the bank’s solvency. In the following 11 days, spooked depositors withdrew a total of $1.3 billion. Mr. Reich said Sen. Schumer gave the bank a “heart attack.”
“Would the institution have failed without the deposit run?” Mr. Reich asked reporters. “We’ll never know the answer to that question.”
Senator Press Conference?
“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,” Sen. Schumer said. “Instead of pointing false fingers of blame, OTS should start doing its job to prevent future IndyMacs.”
IndyMac’s failure, with assets of $32 billion, is expected to cost the Federal Deposit Insurance Corp between $4 billion and $8 billion. It was, nominally, the second-largest failure of an FDIC-insured institution since the $40 billion Continental Illinois checked out in 1984. A record sure to topple, and in inflation-adjusted terms, before this is all over.
Crisis Deepens as Big Bank Fails
IndyMac Seized In Largest Bust In Two Decades
by Damian Paletta and David Enrich
The Wall Street Journal Jul. 12 2008
Earlier on NakedShorts:
Obviousness strikes GSEs
Jul. 11 2008