Schumer The Market Manipulator

In an unprecedented “Leaky Leahy” maneuver, New York Senator Chuck Schumer released to the press a letter that he had penned, specifically noting the financial instability of the failing IndyMac Bancorp:

[D]epositors may have been spooked by a letter late last week from Sen. Charles E. Schumer (D-N.Y.) to the Federal Deposit Insurance Corp., the Office of Thrift Supervision and the Federal Home Loan Bank of San Francisco, saying he was “concerned that IndyMac’s financial deterioration poses significant risks to both taxpayers and borrowers.”

The letter stunned some Wall Street analysts, who said Schumer was in effect sealing the lender’s fate by raising the prospect of its failure. Schumer’s response? Don’t kill the messenger. “Make no mistake about it: IndyMac’s problems were caused by IndyMac’s management and no one else,” Schumer spokesman Brian Fallon said in an email. “The home loan bank system has an obligation to lend responsibly and police its members. But it has not been doing its job. We have found the only way to get the home loan bank system to act appropriately and positively is to make public the concerns we’ve already expressed privately.”

The letter has irritated both bank regulators and bankers alike. John M. Reich, director of the Office of Thrift Supervision responds to the letter:

“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.”

I think that statement explains Schumer’s motivations right there. Schumer, who clearly hails from the far-left would jump at any opportunity to erode public confidence during a Republican administration - especially during an election year. In any event, Schumer acted irresponsibly in leaking such a letter. After all, aren’t professional bank regulators supposed to do the regulating?  Schumer’s actions may vary well do irrevocable harm to the already failing loan industry.

All of this aside, John D. Hawke, the U.S. Comptroller of the Currency from 1998 to 2004 responds:

“If Schumer continues to go public with letters raising questions about the condition of individual institutions, he will cause havoc in the banking system,” Hawke said.

“Leaking his IndyMac letter to the press was reckless and grossly irresponsible. I don’t see how he can be trusted with confidential information in the future. What this incredibly stupid conduct does is put at risk the willingness of regulators to share any information with the [congressional] oversight committees. After this, you’d be crazy to share information with Schumer.”

Reckless. Grossly irresponsible. Can’t be trusted with confidential information. Stupid conduct. Mr. Hawke, I think you nailed it. The Democrats prove again that they cannot be trusted with confidential information.