Federal regulators are pinning the blame on Democrat Senator Charles Schumer (NY) for creating a panic among depositors of IndyMac bank.  IndyMac bank recently was taken over by the federal government.

As you may know, no bank keeps 100% of its deposits on hand.  They take money that is deposited and lend most of it out, keeping only a small fraction as a reserve.  What Chuck Schumer did is unnecessarily spread rumors of the bank’s demise, causing fear among depositors that resulted in a run on the bank.

During a bank run, depositors line up demanding their money, even if they risk no loss because of FDIC deposit insurance.  No bank can survive a bank run since they retain only a small portion of deposits.  IndyMac had no liquidity left, thus they were forced into failure.

If that idiot Chuck Schumer had left his mouth shut the bank probably would not have failed.  Or if it did fail, it would have done so in an orderly fashion.  Now taxpayers will be on the hook for $4 billion to $8 billion because of Schumer’s idiocy.

You don’t need to have a reason for a bank to fail.  All you need is a rumor.  Even healthy banks can fail during a bank run.  Schumer created the rumor.  He is to blame for IndyMac’s failure.

John D. Hawke, former Comptroller of the Currency, (national bank regulator) said the following about Schumer:

If Schumer continues to go public with letters raising questions about the condition of individual institutions, he will cause havoc in the banking system.

Leaking his IndyMac letter to the press was reckless and grossly irresponsible. I don’t see how he can be trusted with confidential information in the future. What this incredibly stupid conduct does is put at risk the willingness of regulators to share any information with the [congressional] oversight committees. After this, you’d be crazy to share information with Schumer.

A Democrat engaging in “incredibly stupid” conduct?  Everything Democrats do is incredibly stupid.  No surprises there.

Democrats destroy everything they get their hands on.

This entry was posted on Monday, July 14th, 2008 at 12:24 pm and is filed under DFL Economic & Tax Policies. You can follow any responses to this entry through the RSS 2.0 feed. You can skip to the end and leave a response. Pinging is currently not allowed.