Ever hear of IndyMac Bancorp? Well, it’s gone! Federal regulators seized the California bank spawned by Countrywide founder Angelo Mozilowhich, which had giddily doled out mortgages to lenders without requiring proof of income. Rather than blame the second largest bank failure in U.S. history on the subprime meltdown, the charmingly politicized regulators at the FDIC blamed the bank’s demise on Senator Charles Schumer (D-NY). Huh?
The Senator recently criticized the Office of Thrift Services for allowing banks to underwrite cruddy mortgages, and specifically mentioned that IndyMac might be in trouble. Afterwards, the bank’s depositors started a run on the bank, withdrawing up to $100 million per day. According to the director of OTS, a political appointee: “The senator made comments in his letter questioning the viability of the institution. When a member of the United States Senate makes such a statement, it frightens depositors.”
If OTS had done its job as regulator and not let IndyMac’s poor and loose lending practices continue, 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.
Now, now, Senator, man up for your actions. Your persistent questions about the subprime meltdown are obviously what got us into this mess in the first place.
The bank’s failure will cost the FDIC around $10 billion. IndyMac customers, like the woman who pointlessly banged on the bank’s doors pleading, “please, please, I want to take out a portion,” will be able to access their money via ATMs over the weekend, and will have full access by next week. The 10,000 customers who collectively deposited $1 billion above FDIC insurance limits will lose half of their uninsured funds.
Regulators Seize Mortgage Lender [NYT]
IndyMac Bank seized by federal regulators [L.A. Times]
IndyMac Seized by U.S. Regulators; Schumer Blamed for Failure [Bloomberg]
(Photo: The Associated Press)