Chuck Schumer Owes the Public an Apology

Federal regulators seized and shut down IndyMac on Friday evening. The bank will reopen today under federal control.

For the first time in recent history, a United States Senator is being blamed for the crisis.

In a written statement, the Office of Thrift Supervision, which regulated IndyMac, said “the immediate cause” of the failure was statements made by Sen. Charles Schumer, a New York Democrat. Mr. Schumer in late June publicly raised concerns about the bank’s solvency.”Although this institution was already in distress, I am troubled by any interference in the regulatory process,” said OTS Director John Reich.

How could a U.S. Senator have that impact? Well, Schumer had concerns about IndyMac that he forwarded to the Office of Thrift Supervision and others. The problem, of course, is that Senator Schumer did not keep his concerns private. He made them very public through a series of well orchestrated leaks. Those leaks necessitated IndyMac filing a notice with the SEC that noted “as a result of Sen. Schumer making his letters public and the resulting press coverage, we did experience elevated customer inquiries and withdrawals in our branch network last Friday and on Saturday of roughly $100 million.”

As the Los Angeles Times reported, “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.”

Bill Clinton’s Comptroller General, John M. Reich, put some perspective on Schumer’s actions.

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

If Senator Schumer wants to grand stand, that’s fine. But let’s not dance around it. His actions have very real consequences, for which he should be held responsible.