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Chuck Schuster to blame for Failure of IndyMac Bancorp..
[QUOTE][B]IndyMac Seized by U.S. Regulators; Schumer Blamed for Failure
By Ari Levy and David Mildenberg[/B]
July 12 (Bloomberg) -- IndyMac Bancorp Inc. became the second- biggest federally insured financial company to be seized by U.S. regulators after a run by depositors left the California mortgage lender short on cash.
The Federal Deposit Insurance Corp. will run a successor institution, IndyMac Federal Bank FSB, starting next week, the Office of Thrift Supervision said in an e-mail yesterday. The regulator blamed U.S. Senator Charles Schumer for creating a ``liquidity crisis'' after a letter on June 26, in which he expressed concern that the bank may fail.
The Pasadena, California-based lender specialized in so-called Alt-A mortgages, which didn't require borrowers to provide documentation on their incomes. The demise adds to the crisis caused by the subprime collapse and may mean regulators will have to raise more money to support the federal deposit insurance program that repays customers when a bank fails.
``IndyMac is the vanguard, the precursor of more stuff coming,'' said Christopher Whalen, managing director of Institutional Risk Analytics, a market research company in Torrance, California. ``It's not surprising to see IndyMac resolved. What you have to ask is what's coming next. It's going to be a wave of medium to bigger-than-medium institutions.''
IndyMac's home state, where Countrywide Financial Corp. was also located before it was bought last week, has been among the hardest hit by foreclosures. California ranked second among U.S. states, with one foreclosure filing for every 192 households in June, 2.6 times the national average.
The lender racked up almost $900 million in losses as home prices tumbled and foreclosures climbed to a record. IndyMac becomes the largest OTS-regulated savings and loan to fail, according to the FDIC.
Mortgages serviced by IndyMac will be turned over to the FDIC and the regulator will be reaching out to customers immediately, Chairman Sheila Bair said on a conference call yesterday. Customers will have access to funds this weekend via automated teller machines and electronically and by phone starting next week.
The FDIC intends to sell IndyMac within 90 days, preferably as a single entity, Bair said. If that doesn't work, the lender will be sold off in pieces, she said.
After peaking at $50.11 on May 8, 2006, IndyMac shares lost 87 percent of their value in 2007 and another 95 percent this year. The stock fell 3 cents to 28 cents yesterday.
IndyMac came under fire last month from Schumer, the Democrat from New York, who said lax lending standards and deposits purchased from third parties left it on the brink of failure. During the 11 business days after Schumer explained his concerns in a June 26 letter, depositors withdrew more than $1.3 billion, the OTS said.
``This institution failed due to a liquidity crisis,'' OTS Director John Reich said in the statement. ``Although this institution was already in distress, I am troubled by any interference in the regulatory process.''
Schumer blamed IndyMac's own actions and regulatory failures for the bank's seizure.
``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,'' Schumer, a New York Democrat, said in an e-mail yesterday. ``Instead of pointing false fingers of blame, OTS should start doing its job to prevent future IndyMacs.''
The failure will cost the federal deposit insurance program about $4 billion to $8 billion, the FDIC said. Some $1 billion of uninsured deposits are held by about 10,000 customers, the FDIC said. Those depositors will get an ``advance dividend'' equal to half the uninsured amount, according to the statement.
The FDIC insures $100,000 per depositor per insured bank, according to the agency's Web site. Customers may qualify for more coverage depending on the type of accounts they own, and some retirement accounts have a $250,000 limit.
IndyMac announced on July 7 that it was firing half its employees. The lender agreed to sell most of its retail mortgage branches to Prospect Mortgage, giving the Northbrook, Illinois based-company more than 60 branch offices with 750 employees. IndyMac also has a retail bank network with 33 branches and $18 billion in deposits, mostly insured by the FDIC.
The company was started in 1985 by Countrywide founders Angelo Mozilo and David Loeb under the name Countrywide Mortgage Investments. In 1999, it converted into a bank from a real estate investment trust. That year, Michael Perry replaced Mozilo as chief executive officer.
Under Perry's leadership, profit more than doubled from $118 million in 2000 to $343 million in 2006 amid the housing boom. The stock more than tripled over that stretch.
Perry will not be continuing with the new FDIC-controlled institution, while other executives will be retained, Bair said. The FDIC's John Bovenzi will assume the CEO role.
This is the stupidest sh*t I've ever read and it shows how moraly bankrupt this country really has become.
Blame the man who speaks the truth that a bank is insolvent? What fantasy world are these sociopathic morons living in?
Blaming Schumer is only right in the respect that it's Congress's lack of enforcement over monetary policy that is the root cause of this crisis. 90% of Congress are criminals who deserve to be be hung by their constituents for nullifying the Constitution.
A lot of people in the government and banking industry already have reservations for an eternity in hell where they will pay for their sociopathic actions.
[B][Good read. It was no accident on Schmer's part...][/B]
Jerry Bowyer (CNBC): [B]How Chuck Schumer Caused the Second Largest Bank Failure in US History[/B]
[I]Federal officials aren’t supposed to cause bank runs. In fact, much of the New Deal bank regulatory apparatus was set up for the purpose of eliminating such panics. When FDR was hit with a massive set of bank runs shortly after taking office, he gave an address in order to calm terrified depositors, assuring them that the banks would reopen shortly, and that everything would be fine. But Chuck Schumer is no FDR. He doesn’t stop bank runs; he starts them. Or, at least, has started one. The collapse of Indymac bank, the second largest bank failure in American history, began with a letter from the office of Senator Charles Schumer on June 27. He questioned the viability of the bank. When a senior senator who is in a number of influential posts regarding oversight of bank regulators directly attacks the confidence of a depository institution, it matters. Not surprisingly, the director of the Office of Thrift Supervision concluded that the collapse of the bank immediately following the Senator’s comments was not a coincidence. Director Reich concluded that Senator Schumer had ‘given the bank a heart attack’.
Why? Why would a federal official with enormous power, destroy an institution on which tens of thousands of depositors (not all of whom are insured) and employees depend? Why would a New York Senator attack a Pasadena bank, acting as some sort of amateur, self-appointed, long-distance bank examiner?
Perhaps this might help answer the question: Indymac has been under attack from the hard left. The Center for Responsible Lending issued an attack on Indymac within a few days of Schumer’s letter. CRL is part of a small army of left of center ‘research’ groups, community organizers, and public interest law firms who make their living accusing home lenders of racial redlining and predatory lending. On June 20th the Center accused Indymac of unfair practices regarding minority borrowers.
A suspicious person might think that a network of lefty attack groups proficient in bank bashing and frequently funded by trial lawyers and short-sellers, coordinated their activities with a law firm on the hunt and a Senator who works closely with the network.
On the other hand, maybe it is a coincidence that CRL and Sen. Schumer attacked the same bank in the same week. Maybe he didn’t know about the CRL report, nor CRL about his letter. Maybe the community group didn’t know about the trial-lawyer class action lawsuit which was launched against Indy a couple of weeks before all of this started.
The political class is shifting left. We’re likely to get Obama and Nancy and Harry running the most advanced economy in the world next year. The investor class doesn’t like what it sees coming. That’s why it is scaling back. Capital is going on strike, and we won’t come back to the table until we see that we have a chance to a fair deal. [/I]
[QUOTE=HDCentStOhio;2626897]There is no bank that has "on hand" all the money it lends out.[/QUOTE]
That is an indictment on the banking system. Not Chuck Schumer for speaking the truth.
Any sane person would question the viability of most banks in the USA today because these morons put themselves up to their neck in worthless debt.
We should not react to fraud with even more lying by pretending that everything is okay, because it sure as hell is not. People have a right to withdraw their funds from these fraudulent banks.
Last edited by JetsCrazey; 07-14-2008 at 05:25 PM.