According to this article that essentially what he’s being accused of by the federal regulators. Any truth to this allegation? Did he actually destroy this bank?
Yes, it sure looks like he did. Way to go, Chuck.
Now, all they have to do is figure out who to blame for Freddie Mac and Fannie Mae. 
Obama. Clearly. No question.
Here’s a picture of some of the guys who gave this particular house of cards its building permit. Now one of the guys in that picture is blaming someone for coughing at the wrong moment.
Ain’t enough rolleyes.
So you’re saying that the kid who pointed out that the emperor has no clothes is the person responsible for his being naked?
This seems logically equivalent to looking at an area slowly decaying due to a high crime rate, and instead of blaming the criminals blaming the people reporting the crime.
If this was a perfectly healthy bank destroyed by this single letter, then maybe you would have a point. But it wasn’t, it was a bank in a poor state due to making bad decisions over the years. I don’t believe it is sound public policy to demand absolute silence regarding potential issues at the bank in the hopes that the problems will go away by themselves.
This line from the New York Times article also doesn’t make sense to me:
Wait, so the investors changes all their plans based on the concerns of a politician (not a trained economist) who has access to the same information they had access to? What kind of research were they doing beforehand? Picking banks to buy from a dartboard? “Oh no, we landed on IndyMac, but a senator thinks it is unstable! Run away, run away!”
Wouldn’t they have done their own detailed analysis, and placed a far greater weight on that then the views of an untrained politician?
I don’t know the facts of this particular case, but with banks, yeah, it can work exactly that way. No bank has enough assets to pay off all its depositors at once, and so even if the bank was otherwise healthy, the simple belief that the bank was failing could cause the bank to fail.
Now, maybe this particular emperor was already mostly naked to start with, wearing just a bow-tie and a thong. Not exactly appropriate attire for financial royalty, but the hope might’ve been that his dangly bits would’ve been protected long enough to get through the crisis. But then Schumer spoke, and suddenly his junk was swinging in the breeze. The last bit of hope, and clothing, vanished with the words of a United States Senator.
Like I said, I don’t know the facts here, but maybe things really would’ve worked out alright if he had just shut the fuck up about it. It’s a real possibility.
The fact is, there was a net inflow of deposits to the bank. Then a Senator releases a letter calling into question the bank’s stability, and immediately the inflow turns into an outflow. Within 11 days 1.3 billion dollars are pulled from the bank.
It’s irrelevant to the question whether or not the bank was in great shape. The fact is, runs on a bank rarely happen in climates of stability and sound finances. Of course there were already worries. What Schumer did was the equivalent of walking up to a smouldering pile of rags and blowing pure oxygen on it. It was a stupid thing to do.
Mind you, this isn’t Republicans in Congress or Rush Limbaugh saying Schumer is responsible - it was federal regulators who said this, speaking in an official capacity. You don’t just take that accusation lightly. And the facts seem pretty clear, unless someone can come up with another reason why a net inflow turned into a 1.3 billion dollar outflow, with the change exactly coinciding with the release of Schumer’s letter.
If he did, I trust that **Dio “Ding dong the Snow is Dead” the Cynic ** will wish a painful death upon him.
You’re referring to a Federal regulator who was in the chainsaw photo-op.
In this case, I certainly do. YMMV, but to me it looks like a guy who’s trying to offload his responsibility.
I am having a hard time finding a transcript of the actual letter, and details of how it was publicized. However, assuming that Schumer was responsible for both the letter and making it public I’ll have to retract some of my earlier statements and agree that it was not the brightest move on Schumer’s part, and he should have found a way to communicate his concerns to the appropriate offices without causing a public scare.
On the other hand, this is a tough call. It is part of his job to be concerned about this if he feels regulators are not doing their job, and sending letters stating this to the Federal Deposit Insurance Corp., the Office of Thrift Supervision, the Federal Housing Finance Board and the Federal Home Loan Bank of San Francisco (I’ve seen some news reports indicating that these are the offices that he sent the letter to) does not seem out of line. The question then is, what process caused it to fall into the public domain? Did he leak the letter himself? Or did one of the offices leak the letter? I am having difficulty finding details about that.
It also appears that his letter did not include any facts that were not already public, so even if he did push the bank over the edge it might be a bit unfair to say that he caused the collapse. After all, in that case we should be asking politicians, journalists and everyone else not to dare mention what is already publicly known, lest an article or letter do the damage. This seems a little unreasonable.
Certainly you do but is that a well thought out position or a knee-jerk, Republicans, business people bad; liberals good reaction? Just asking. Maybe it is.
You certainly know how to craft a concise and well-reasoned argument.
Sam, there’s at least one problem with your thesis. And that is that people “in the know”, people with the “right connections”…they are better positioned to get thier money out before the trajectory of the shit intersects the locus of the fan. Clearly, the evidence was “out there”. Was no one withdrawing their money *before * the Senator’s comments? (I don’t know, an honest question, I have very little direct involvement with major financial institutions, except when they double what they charge me for overdrafts…)
Yeah, this is pretty much right (though the junk swinging image is rather troubling).
The “credit crisis” is precisely this–most investment banks borrow on a continuous rolling basis, every day–when lenders got nervous and wouldn’t lend to Bear Stearns, downthetubes it went because it couldn’t operate on a daily basis–no matter what it long-term assets were worth.
Most banks need a stable deposit base to operate on a daily basis–when depositors bail, the bank can no longer operate now because it has tied up assets for the long-term.
Was the bank dumb not to up its cash or pare its shocking! mortgage assets in this queasy market? Yes, but there are other banks out there in substantially similar posisitons. Was it “fair” that this one got cratered by a Senator? There’s negative chatter by shorts all the time, some of whom are much more intelligent than Senators. Part of the environment.
Ya know how McCain just got slammed for saying the economy’s problems are psychological? Stupid thing to say since “economic problems” to voters are gas prices, not susceptible to market confidence issues. This OTOH is what he was trying to get at–the entire financial sector relies on the confidence of its counterparties that it can operate on a daily basis–if that confidence is withdrawn, it will not be able to so operate.
Even for a well capitalized bank, surviving a run on the bank would be difficult. This is a modest sized regional bank with $32 billion in assets. Losing $1.3 billion in deposits that quickly was going to take them down even if their problems weren’t that severe.
Moderator’s Note: The poster in question hasn’t even posted to this thread, and the thread that you seem to be referring to here is a Pit thread. Please keep the personal disputes with other posters in the Pit instead of dragging them into unrelated GD threads.
Well, that was sure a well-thought-out argument, as 'luc noted.
There’s a third alternative: a “the Bushies have managed to politicize the entire Executive Branch, and render most of it incompetent, so why should we expect any less of this fucker?” argument. The point where these douchebags deserved the benefit of any doubt was left in the dust years ago.
Also, Sam’s sudden faith in “federal regulators…speaking in an official capacity” is quite touching. Nothing like a foxhole conversion, no matter how temporary.
To be fair, your argument has been to point at a picture and assume that proves…something. Acknowledging that deregulation was a culprit, do you believe that Schumer’s letter was entirely blameless? It’s been pointed out that the letter seemingly caused a run that would leave even healthy institutions crippled. Do you dispute that?