Train Conductor Chuck Pushed Throttle on IndyMac
Some U.S. senators don't just want to make the news, they want to be front and center in the headlines. Charles Schumer, U.S. Senator from New York, is the latest headline maker.
Chuck Schumer's letters in late June to banking agencies inquiring about the stability and strength of IndyMac bank -- prior to the bank's takeover on July 11 by the FDIC - were pointed to as a contributing factor to the bank's failure. More than one observer saw IndyMac's chances of finding a buyer dry up as depositors withdrew more than $1.3 billion in funds after Schumer went to the media with a letter that voiced his doubts about the bank's health. Office of Thrift Supervision's announcement of the bank's closing blamed Schumer for that run on the bank that was the immediate cause of the closing.
Lesson learned for everyone: Never underestimate the power of a senator's letter, especially when he turns it into a press release for the regular news media. Was it contributory to the ultimate takeover of IndyMac? The senator says he can't be held responsible for IndyMac's demise, citing that the IndyMac train wreck was already happening and that had the OTS had done its job, "We wouldn't be where we are today...Instead of pointing false fingers of blame, OTS should start doing its job to prevent future IndyMacs."
But I will say it: Conductor Chuck, you pushed the train's throttle to make it reach its final destination of demise and FDIC takeover even faster than it would have on its own.
The OTS says it had been working with the troubled bank since November 2007 to change its operations, and the bank was looking for a buyer or more capital. The senator's letter "undermined the public confidence essential for a financial institution and took away the time IndyMac needed to pursue a recovery," OTS says.
For the other institutions out there, taking appropriate measures to lower your institution's risk profile while maintaining customer confidence will help keep your institution on the right track, as the industry winds its way back to recovery.
