Feds Seize IndyMac After Schumer Letter Causes Run on the Bank
The New York Times reported that federal regulators seized IndyMac Bancorp on Friday, making it one of the largest bank failures in American history.
Dan sent in this on the story:
The run on the bank came after a critical letter about the bank from Senator Charles E. Schumer, Democrat of New York. Federal regulators said on Friday that Mr. Schumer’s letter had prompted the collapse by causing the run and scaring away potential acquirers.
“The senator made comments in his letter questioning the viability of the institution,” John M. Reich, director of the Office of Thrift Supervision, said in a phone call with reporters. “When a member of the United States Senate makes such a statement, it frightens depositors.”
In the days after Mr. Schumer’s letter was released on June 26, IndyMac customers withdrew an average of $100 million a day from the bank, or a total of $1.3 billion, the government said. Before Mr. Schumer’s letter, the bank had been receiving net inflows of money from depositors, Mr. Reich said.
The question remains: Did Schumer break the law by causing a run on IndyMac?
The Wall Street Journal has more on Senator Schumer’s connection to the bank’s collapse.
LA Land blog has this press release from IndyMac- thanks to Beto Ochoa.
Here’s what they said:
“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.
Doug Ross has an excellent timeline of events that led to the run on the bank.