Saturday, July 26, 2008

Full Cover Up Mode

"Sen. Charles Schumer, hit with criticism from a federal regulator that he contributed to the failure of IndyMac Bank, said he may have caused some depositors to withdraw their money but that he wasn't responsible for the bank's downfall. Sen. Schumer, a New York Democrat and member of the Senate Banking Committee, said IndyMac's lending practices and lax federal supervision are to blame for the failure of the thrift on Friday. ... 'Everything I wrote in my letter was publicly available. There was no new information there. It was what legislators are supposed to do.' ... OTS Director John Reich said Friday ... Schumer should have privately addressed his concerns with regulators. ... Schumer ... [said] 'Clearly what happened here was the OTS ... sought to blame the messenger. In sum, it's sort of classically what this adminstration does. Blame the fire on the guy who called 911.' ... Schumer has also been one of the most vocal critics of the bond rating firms. ... Last week, after the SEC came out with a report criticizing practices at the rating firms, Sen. Schumer said the agency 'should look at enforcement measures' to respond to the 'searing abuse' found. In May, he also said that Moody's president, Brian Clarkson was correct to resign over the crisis of confidence in ratings", Sarah Lueck at the WSJ, 14 July 2008.

"The federal takeover of IndyMac Bank over the weekend could cost the [FDIC] between $4 billion and $8 billion. But Senator Chuck Schumer, who helped to precipitate the collapse by publishing a letter to the bank's regulator last month, has no remorse. He was, he says, just doing his job in telling regulators that the bank 'could face a collapse,' a prophecy that quickly proved to be self-fullfilling. ... The Office of Thrift Supervision (OTS), whose job it actually was to regulate IndyMac, took a different view. 'The immediate cause of the closing,' the OTS wrote in a press release, '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 OTS added: 'In the following 11 business days, depositors withdrew more than $1.3 billion from their accounts.' ... Only last week, the [SEC] announced an investigation into the role of rumor-peddlers in the run on Bear Stearns. We doubt somehow that Mr. Schumer will receive similar SEC scrutiny for his very similar role in bringing about a liquidity crisis at IndyMac", my emphasis, Editorial at the WSJ, 15 July 2008.

I agree with Schumer. John Reich, shut up. Look at the SEC's attack on short sellers. Instead of setting up the rating agencies for rafts of lawsuits, the SEC attacks short sellers. Chris Cox must live in Wonderland.

The OTS "took a different view". So? If the OTS had done its job, IndyMac (IMB-NYSE) would not have gotten into the shape it was. I'm behind Schumer. How does the WSJ know "rumor-peddlers" brought down Bear? If is does, let it publicly identify them and give Mike Garcia the names. The Bush administration is in "full cover up mode" to protect insolvent financial institutions. On 3 November 2006, IMB was $45.82, on 26 June 2008, $0.80, a 98.3% drop in 20 months. What does the WSJ think caused that? Chuck Schumer?

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