The Schumer-making-crashy-bank thing made me think...

[Manedwolf]

Maned,

This is more like yelling fire in a theater that is...on fire. 

No. It's like noticing a tiny bit of smoke from something smoldering, yelling "Fire" and causing a trample panic, instead of seeing what can be done to put it out while at the same time quietly getting people towards the exit.

Hadn't you already known Schumer is an absolute idiot who spews trash from his mouth with absolutely no brain behind it? Look at what he says about guns.

[De Selby]

Maned,

This is more like yelling fire in a theater that is...on fire. 

No. It's like noticing a tiny bit of smoke from something smoldering, yelling "Fire" and causing a trample panic, instead of seeing what can be done to put it out while at the same time quietly getting people towards the exit.

Hadn't you already known Schumer is an absolute idiot who spews trash from his mouth with absolutely no brain behind it? Look at what he says about guns.

Uh, you consider what was imminent failure absent some miracle appearance of tens of billions in cash (in a market with a serious credit crunch) to be "smoke"?

I'm amazed at how a group that can be so supportive of private property rights, can be so permissive of theft via mismanagement.  Schumer didn't hold himself out to be an honest provider of banking services, then take millions in money into his accounts, and use it to gamble on garbage loans resulting in huge losses.  IndyMac did that. 

IndyMac took other people's money, and lost it through grossly negligent management.  What kind of culture of personal property rights do you expect to maintain when you live in a country where "that's just the cost of doing business", and it's wrong to even mention it out of fear that the grossly negligent business might fold because it has to give back angry customers' money?

[Manedwolf]

You might as well quit arguing with shootinstudent.  It's apparent he is a banking expert, too.

Yeah, I'm noticing that.

[Headless Thompson Gunner]

You might as well quit arguing with shootinstudent.  It's apparent he is a banking expert, too.

Yeah, I'm beginning to get that impression.

Edit:  Heh, looks like Maned beat me to it.

[De Selby]

You might as well quit arguing with shootinstudent.  It's apparent he is a banking expert, too.

You don't need to be a banking expert to recognize when someone is behaving recklessly with the property of another.  That's a matter of common sense, which is why it's all the more egregious when "financial experts" do it.

[MechAg94]

I don't need to be a banking expert to know that SS is going to argue about something until this thread closes.    But some of these threads are more lively because of it so no big deal. 

It was very irresponsible of Schumer to do what he did.  It is even more reckless and irresponsible if he is on the committee that is overseeing this bank activity and watched them get into this situation over the last few years.  Whether any other motives were involved is unknown.  IMO, that goes for any party. 

Isn't a bank run where creditors demand all their money back and it is more than what the bank has on hand to give?  Given that, it is impossible to guess whether the bank would have failed soon, later, or ever.  All that is for sure is that they were in a poor financial position and Schumer's comments came at a bad time.   

[RaspberrySurprise]

The Titanic was all ready going down, Shumer just told them how many lifeboats were aboard. If the bank was giving out crap loans it would have failed eventually.

[MechAg94]

I tend to agree with that, but I still think Schumer should keep his mouth shut about it, mainly due to his position in the Congress.  If he were some guy in the media I wouldn't care so much.

[De Selby]

I tend to agree with that, but I still think Schumer should keep his mouth shut about it, mainly due to his position in the Congress.  If he were some guy in the media I wouldn't care so much.

In other words, you're upset that Schumer let IndyMac's customers in on the truth about IndyMac's financial situation, and that those consumers then acted on his truthful information?

[MechAg94]

No, just that if his job is oversight of this sort of mess, he is probably supposed to prevent it or make sure it is public long before it gets that bad. 

[De Selby]

No, just that if his job is oversight of this sort of mess, he is probably supposed to prevent it or make sure it is public long before it gets that bad. 

Okay, but once it gets that bad....stating truthful information to the media is wrong?  He should keep indymac's secrets from its customers?

And look-now IndyMac's being investigated for fraud.  But don't let that stop you from blaming a guy who stated truthful information in public for this mess. 

[Headless Thompson Gunner]

It turns out that Schumer didn't merely release "factual information about IndyMac".  He leaked partial, incomplete, and confidential  data from a regulatory probe of IndyMac.  His leaked letter was laced with innuendo and suggestions that the bank was immediately going to fail. 

In reality, IndyMac wasn't in imminent danger.  Deposits had been increasing steadily in the weeks prior to Chuck's bank run.  OTS regulators had been monitoring the bank all along, and had concluded that a regulatory takeover wasn't necessary because there was no immediate danger of failing.  They had been working with IndyMac and other banks to come up with a buyout that would protect all of IdnyMac's depositors.  (A buyout would have been perfectly normal in a case like this, not a "miracle" as shootinstudent claims.)

John Reich, Director of the Office of Thrift Supervision, wrote a letter back to Schumer, trying to beg, plead, or shame Schumer into shutting up.  It didn't work.

"As a regulator of insured depository institutions, we do not publicly comment on the financial condition or supervisory activities related to open and operating institutions," Reich wrote. "We believe it is critically important to maintain the confidentiality of examination and supervision information."

He went on: "Dissemination of incomplete or erroneous information can erode public confidence, mislead depositors and investors, and cause unintended consequences, including depositor runs and panic stock trades. Rumors and innuendo cause damage to financial institutions that might not occur otherwise and these concerns drive our strict policy of privacy."

Reich knew that Schumer's comments were going to cause a run that could kill the bank.  Schumer had to have known it too.  Nobody could be that stupid, least of all a Senator on the banking oversight committee.  Schumer leaked his letter because he wanted IndyMac to fail.

Regulators were aware of the problems with IndyMac and were working with them behind the scenes to find a buyer to take over the bank and prevent any losses to depositors.  According to the OTS:

*   With limited prospects of maintaining adequate capitalization, IndyMac sought to obtain a significant capital infusion or to find a buyer.

*   The pressure on IndyMac required time to be relieved. Negative news coverage and a subsequent deposit run beginning on June 27, 2008 took that time away. The deposit run followed the release of a letter from Senator Charles Schumer to the FDIC and OTS on June 26, 2008. The letter outlined the Senators concerns with IndyMac. The institution did not have sufficient access to liquidity to withstand the deposit run.

IndyMac had a good chance at returning to normalcy, either through recapitalization or a buyout.  Either possibility would have protected depositors.  By forcing the run when he did, Schumer killed any chance at a positive outcome for IndyMac.

The bottom line is that we know for certain IndyMac wouldn't have failed right now without Schumer's intervention, and we know there was a strong possibility that IndyMac wouldn't have failed at all if not for Schumer's actions.  Schumer killed the bank deliberately, by behaving in a manner that was shockingly, reckless, and deliberately negligent.

If there were any justice in the world Schumer would be tarred and feathered for this stunt.  Here's to hoping IndyMac shareholders sue the bejeezus out of him.

[m1911owner]

I suspect that Congress has given themselves immunity for things like this.

If you or I did what Schumer did, we'd not only be looking a massive lawsuits, we'd probably also be looking a spending some hard time in the slammer.

[Waitone]

So Schumer stokes IndyMac's customer to run to the bank to protect themselves.  Earlier unknown personages did the same thing to Bear Stearns.  Different (assumed) personages attempted to help Lehman Bros. but were unsuccessful.  Now I see the FBI and SEC poking around trying to find the source of "rumors" which led to the demise of BS.  So how come the same FBI / SEC/ FDIC etc are not investigating Brother Schumer?

[thebaldguy]

Don't consumers have a right to know how a bank is doing? If a bank is not doing very well, don't the customers have a right to know?

I'm laughing at the blame game. Let me get this straight: a bank is doing bad, but customers shouldn't know because they will pull their money out.

Ok.

I have a right to bank where ever I want. If a bank is going bad, why should I give them my money? Why should I support inflated salaries of the big shots at the bank for doing a bad job?

[De Selby]

Don't consumers have a right to know how a bank is doing? If a bank is not doing very well, don't the customers have a right to know?

I'm laughing at  he blame game. Let me get this straight: a bank is doing bad, but customers shouldn't know because they will pull their money out.

Ok.

I have a right to bank where ever I want. If a bank is going bad, why should I give them my money? Why should I support inflated salaries of the big shots at the bank for doing a bad job?

Because they'll be able to take better care of your money if no one ever talks about what's going on with the books?

I don't get it either; blame goes to the guy who committed fraud in running the bank, not the guy who let the public know they were being cheated.

[longeyes]

It will be interesting to see who buys up what's left of the financial sector, after the dust settles, at 10c on the dollar.

[thebaldguy]

Oh, and don't ever put more than $100,000.00 in a bank. Period. I know that's not a problem for most people, but if you sell a house, put the money in different banks. It's a little bit of a hassle, but losing your money is a bigger hassle.

No banker will ever tell you to NOT put more than $100,000.00 in their bank. They don't always look out for YOUR best interests.

[Racehorse]

There seems to be a basic lack of understanding on the part of some in this thread about how a bank functions. No bank ever has the money on hand to repay all or even a substantial portion of its depositors. A run on ANY bank would cause it to fail. Banks work by borrowing money from consumers and businesses and then lending that money to other consumers and businesses. They make money by charging more to those they lend to than what they pay out to depositors.

They don't keep much money on hand at all. Anyone that would knowingly leak information that would cause a run on a bank is very irresponsible. It's usually possible to sell off the assets and liabilities of a bank to keep customers from losing their money. In this case, it would have been possible. But Schumer precipitated a run on the bank that caused many people to lose a lot of money.

When a business or economy runs in large part on consumer confidence, as ours does, predictions of doom usually become self-fulfilling prophecies.

[thebaldguy]

There seems to be a basic lack of understanding on the part of some in this thread about how a bank functions. No bank ever has the money on hand to repay all or even a substantial portion of its depositors. A run on ANY bank would cause it to fail. Banks work by borrowing money from consumers and businesses and then lending that money to other consumers and businesses. They make money by charging more to those they lend to than what they pay out to depositors.

They don't keep much money on hand at all. Anyone that would knowingly leak information that would cause a run on a bank is very irresponsible. It's usually possible to sell off the assets and liabilities of a bank to keep customers from losing their money. In this case, it would have been possible. But Schumer precipitated a run on the bank that caused many people to lose a lot of money.

When a business or economy runs in large part on consumer confidence, as ours does, predictions of doom usually become self-fulfilling prophecies.

I've worked in brokerage/finance/banking for over 10 years. I know how banks work all too well. I know that they only need to keep a small percentage of cash on hand. I'm also upset that they are depending on people keeping their money in a bank to keep it afloat because they made bad business decisions.

Again, why should I keep my money in a bank that gave loans to people they shouldn't have given loans to? I'm supposed to support a business that made bad business decisions? I'm supposed to make sure the overpaid bad decision makers keep making millions in salaries? They don't get punished, employees get laid off, and they keep their jobs and big salaries for running a bad business?

Maybe it's time to starve the monster. Maybe it's time to pass a law that says if a bank gets bailed out, the big shots go to jail.


HAHAHAHAHAHAHAHAHAHAHA! Like THAT would ever happen...

[De Selby]

There seems to be a basic lack of understanding on the part of some in this thread about how a bank functions. No bank ever has the money on hand to repay all or even a substantial portion of its depositors. A run on ANY bank would cause it to fail. Banks work by borrowing money from consumers and businesses and then lending that money to other consumers and businesses. They make money by charging more to those they lend to than what they pay out to depositors.

They don't keep much money on hand at all. Anyone that would knowingly leak information that would cause a run on a bank is very irresponsible. It's usually possible to sell off the assets and liabilities of a bank to keep customers from losing their money. In this case, it would have been possible. But Schumer precipitated a run on the bank that caused many people to lose a lot of money.

When a business or economy runs in large part on consumer confidence, as ours does, predictions of doom usually become self-fulfilling prophecies.

Yeah, I think we all understand that-but that isn't what happened to IndyMac.

A bank that is performing well doesn't have people lining up in the streets to take their money based on truthful press releases; IndyMac had that because the bank was failing in such a way that the liabilities were going to eat the whole thing.

[Racehorse]

Again, why should I keep my money in a bank that gave loans to people they shouldn't have given loans to? I'm supposed to support a business that made bad business decisions? I'm supposed to make sure the overpaid bad decision makers keep making millions in salaries? They don't get punished, employees get laid off, and they keep their jobs and big salaries for running a bad business?

I haven't seen anyone here blaming the customers for wanting to take their money out. I don't think anyone has a problem with that. What I have a problem with is Schumer spouting off about the bank's status thereby creating a situation where depositors lost more money than they would have otherwise. Do you think that was the right decision on Schumer's part?

[Racehorse]

A bank that is performing well doesn't have people lining up in the streets to take their money based on truthful press releases; IndyMac had that because the bank was failing in such a way that the liabilities were going to eat the whole thing.

Actually, a bank that is performing well could very easily have people lining up in the streets to take their money if a high-ranking official gave an opinion that the bank was not stable and may fail.

Of course IndyMac was doing poorly. But had Schumer kept his mouth shut, a lot more depositors would have gotten their money out than actually did. Headless Thompson Gunner's post made that point quite well.

I just don't get it. Why are you defending Schumer? What he did was idiotic at best and malicious at worst.

[Rocketman56]

I think the letter from Schumer was something that is out of his domain.. If he leaked that letter after
the OTS asked him not to, then I would have to look at that as a political act..   Regulators
have taken over banks to save depositors..  (It happened a short while ago to ANB here in town..)
Usually, depositors don't lose in a take-over.. Shareholders do, but that's a different issue..

There's a suspicion of malice here..  A valid suspicion...  Who are the people who lost a lot
of money in IndyMac, either depositors or shareholders??   If many are elite in the other party,
then the suspicion becomes even more valid.. Schumer would have had that information
or could have obtained it easily..

Care to comment on that supposition?

Steve

[thebaldguy]

I guess my point is why are banks trying to keep their business failures a secret? Why doesn't the general public legally have the right to know why and which banks are failing?

Banks made very bad business decisions, and that needs to be kept secret from the general public? I think not! If they are afraid of a run on a bank, then the overpaid bank owners need to get their act together. They made very bad business decisions, and they feel that needs to be kept a secret so people won't suddenly pull their money out? Give me a break!

I hate supporting overpaid business owners who made bad business decisions, especially banks. They can lend out all their customers' money, lose it, and watch the FDIC cover their bad decisions will absolutely no risk. They get to keep their inflated salaries, and taxpayers foot the bill and inflation increases.

Deceiving customers and forcing them to keep money in a poorly run bank is not right. The heads of those banks need to suffer for their bad decisions, but that will never happen.

If you even think your bank sucks, pull out your money and put it into a better bank. Well run banks deserve your business; badly run banks do not.