Sen. Charles E. Schumer publicly taunted bank regulators last week about IndyMac Bancorp’s financial condition, which helped trigger a sudden outflow of deposits from the Pasadena thrift. Now the New York Democrat is getting some harsh blowback from one current and one former regulator.

Their message, distilled: Zip it, Chuck.

As noted here on Monday, Schumer sent letters to the Office of Thrift Supervision, the Federal Deposit Insurance Corp. an the Federal Home Loan Bank of San Francisco, saying he was “concerned that IndyMac’s financial deterioration poses significant risks to both taxpayers and borrowers.”

IndyMac, which has suffered huge losses on defaulted mortgage loans, “could face a failure if prescriptive measures are not taken quickly,” Schumer wrote.

Uh, wait a minute — how could Schumer know that? And since when are regulators supposed to tell the public in advance that a particular institution has been earmarked for failure? All that would do is guarantee a collapse. If depositors are within FDIC insurance limits they have nothing to worry about, anyway.

That pretty much sums up the content of a letter to Schumer today from John M. Reich, director of the Office of Thrift Supervision.

“As a regulator of insured depository institutions, we do not publicly comment on the financial condition or supervisory activities related to open and operating institutions,” Reich wrote. “We believe it is critically important to maintain the confidentiality of examination and supervision information.”

That’s Tom Petruno of the LA Times blog.

He went on: “Dissemination of incomplete or erroneous information can erode public confidence, mislead depositors and investors, and cause unintended consequences, including depositor runs and panic stock trades. Rumors and innuendo cause damage to financial institutions that might not occur otherwise and these concerns drive our strict policy of privacy.”

Charles SchumerYa know, one would almost think that what Schumer is about is eroding public confidence in the economy. Now why do you suppose he’d want to do that? Why would Schumer, a Democrat from as far to the left end of the scale as one might imagine, want to erode public economic confidence during a Republican administration, and during an election year?

Gee, I wonder.

Aside from the rather nasty implications of that, one also must wonder if Schumer profits from this in terms of stock holdings in IndyMac’s competition. But however that falls out, this was nothing but market manipulation from his government perch… along with the use of government provided insider information, for which Schumer should stand trial, and prison. And keep in mind, I live in New York State.\

Addendum:  (David L)

Michelle has more.



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