California’s attorney general is reviewing a request by former employees of IndyMac Bancorp Inc to investigate whether a New York senator triggered the bank’s collapse by releasing confidential information.
At issue is a much-publicized letter that Chuck Schumer, a Democrat, sent in June to the Federal Deposit Insurance Corp (FDIC) and Office of Thrift Supervision (OTS) questioning the company’s ability to survive.
The FDIC took control of IndyMac on July 11 after depositors withdrew more than $1.3 billion over 11 days. It was the third-largest bank failure in U.S. history. At the time, OTS Director John Reich blamed Schumer’s letter for causing the run on the bank.
In a letter to Attorney General Jerry Brown last week, 51 former IndyMac workers wrote: “From the day (Schumer’s) letter was made public on June 26 until the closure of the bank, a run on the bank took place and the failure became inevitable.”
Brown’s spokeswoman Christine Gasparac said on Wednesday that his office was reviewing the letter and that a decision on whether to act on it could be made as early as next week.
Of course, it should go without saying that the allegations and the facts behind them raise a lot of concerns. Senators are supposed to act with tact and discretion and publicizing a letter that basically calls into question the ability of a particular bank to survive during a period of economic uncertainty does not tact and discretion make.