I’m always amazed at the hubris of politicians, although, one would think at this point in my life that I really shouldn’t be amazed at all.
On Friday of last week, Federal Regulators seized IndyMac Bancorp, a $40 billion thrift. It appears that letters sent by Sen. Schumer to federal agencies in June and made public by the Senator’s office may have contributed to IndyMac’s untimely demise by inadvertantly setting off a run on the bank’s deposits.
Senator Schumer vehemently denies that his grandstanding caused the bank’s failure, suggesting instead that the Office of Thrift Supervision blew it by allowing banks to make risky loans. But Senator Schumer is a member of the Senate Banking Committee, which has oversight responsibility (a key word somewhat foreign to some members of Congress, especially grandstanders) over both the OTS and IndyMac.
No matter how you slice it, the public release of Senator Schumer’s letters did not help the situation at all. There was no need to make a public statement. He sent the letters to the agencies, and a humbler man would have acknowledged his effort and waited for a response. Perhaps eyeing a potential Presidential campaign in four years, he clearly wanted to flex his muscles, and despite what he says, his office’s actions contributed to IndyMac’s failure.
No one ever complains when times are good. Senator Schumer was mum for years as banks and mortgage lenders made less-then-stellar credit decisions, and he was a guy who could have made a difference since he was part of the committee that oversees our financial system. An appropriate analogy would be: he’s the guy that is closing the barn door, screaming about the horse being gone, but he’s also the guy that left the door open in the first place, and once the door’s closed, the horse can’t get back in the barn.
Words and actions matter, Senator Schumer. They matter a great deal, and in this case, your grandstanding carries some severe unintended consequences.