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We’re seeing the third largest bank failure in United States history today with the seizure of IndyMac by federal regulators (emphasis added):
IndyMac Bank, a prolific mortgage specialist that helped fuel the housing boom, was seized Friday by federal regulators, in the third-largest bank failure in U.S. history.
IndyMac is the biggest mortgage lender to go under since a fall in housing prices and surge in defaults began rippling through the economy last year — and it likely won’t be the last. Banking regulators are bracing for a slew of failures over the next year as analysts say housing prices have yet to bottom out.
The collapse is expected to cost the Federal Deposit Insurance Corp. between $4 billion and $8 billion, potentially wiping out more than 10% of the FDIC’s $53 billion deposit-insurance fund.
The Pasadena, Calif., thrift was one of the largest savings and loans in the country, with about $32 billion in assets. It now joins an infamous list of collapsed banks, topped by Continental Illinois National Bank & Trust Co., which failed in 1984 with $40 billion of assets. The second-largest failure was American Savings & Loan Association of Stockton, Calif., in 1988.
The director of the Office of Thrift Supervision, John Reich, blamed IndyMac’s failure on comments made in late June by Sen. Charles Schumer (D., N.Y.), who sent a letter to the regulator raising concerns about the bank’s solvency. In the following 11 days, spooked depositors withdrew a total of $1.3 billion. Mr. Reich said Sen. Schumer gave the bank a “heart attack.”
“Would the institution have failed without the deposit run?” Mr. Reich asked reporters. “We’ll never know the answer to that question.”
The letter in question is one Schumer released publicly June 26th, demanding action to prevent the collapse. What happened? Depositors got scared, pulling their money out of the bank, leaving the FDIC with no choice but to close the bank and pick up a bill of over $1 billion. And guess who gets to pick up the tab for the FDIC? That’s right, folks: it’s you and me, the American taxpayers.
I worked in banking for a few years. The FDIC only insures up to $100,000. Anyone with account balances higher than that are just going to have to eat the losses. But of course, if they have a bank account balance of over $100,000, that makes them “the rich”, and “the rich” is a group of evil, greedy corporate stooges, so I guess this isn’t a tragedy, is it?
Maybe, just maybe, things like this could be avoided if the Democrats would stop meddling with the free market. The more Democrats try to interfere with our economy, the more it crashes. And the more it crashes, the more government intervention Democrats think is necessary. And somehow, Americans keep voting Chuck Schumer & Co. into office.
How much money can we afford to lose before we wise up?
Hat Tip: Hot Air
Toa says: “The more Democrats try to interfere with our economy, the more it crashes.”
I think that this (crashing) is what “Liberals” have in mind. This, to me, explains their constant bleating about the American economy being shot, along with the monstrous hoax of “global warming”: whip up a national frenzy/panic about current conditions, then set up a Leftist Hero (Gore, Obama, Hollywood celebrities, etc.)to come riding in on a white private jet- uh, I mean carbon-free horse- with the “solution” for everything…which is, of course, Big “Liberal” Government takeover.
Charity says: That’s interesting. My husband was just telling me that he thinks the economy is fine, but the media and politicians are in the process of creating a real economic crisis with all of their negative talk.
I say we start deducting the cost of this from Schumer’s salary.
Shannon in AZ says: Those FDIC $100,000 is all our money. The FDIC is the ONLY insurance company that does not have all that it insures safely secured. The Federal government gives it a blank check to cover whatever needs to be covered.
The whole banking system is based upon transient sums of money being available to a bank at a given moment. The essence of successful banking is to have your incoming transient money equal or exceed the transient sums which leave your bank at any given moment.
Thanks to Chuck the Shmuck Putzhead Schumer, IndyMac’s transient sums (A) stopped coming in; and (B) started to go out in significant quantities. And so, IndyMac crashed. Senator Putzhead is now blaming the Office of Thrift Supervision for not adequately supervising IndyMac. But it must be remembered that OTS has neither the right nor the power to prevent depositors from withdrawing money from an operational bank. If all the depositors wish to draw out their dollars, then OTS cannot stop a bank from crashing.
In any event, what kind of reward do I get for having been current (and then some) on my own mortgage payments? On a house which my wife and I purchased after determining that our combined incomes could in fact support the costs of home ownership! We could easily have purchased a bigger house, but we set limits and stuck with them!
Now that Chuckie Shmuckie wants to reward those who made bad decisions and now find themselves in a little bit deeper than they had planned, why shouldn’t I get a bailout from my mortgage as a reward for sound fiscal planning?
I’m generally against government bailouts. I think if bad business decisions lead a company to failure, it needs to fail. But many times the small guy gets hurt worse than the guys who made the bad decisions.
But it’s not the job of we taxpayers to bail out mortgages for people who bought (and were most likely encouraged) to buy more house than they could afford. How much will this cost us? Yes, maybe some institutions should be encourage to refinance some mortgages. But if they’re not doing that, why not? Why follow bad money with more bad money?
Mortgage lenders just threw money at people. That was stupid. We shouldn’t have to bail them out.
We can’t drill for our own oil, but we have to bail out deadbeats. Makes no sense to me.
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