Nice going Chuck

Chuck Schumer has always been known as a grand stander and a big mouth, ready to pimp to the populist fashion in the eternal quest for votes. Always wanting to be seen fighting for the people against corporate and banking interests, Chuck can be a loose cannon. This time he has cost the treasury a few billion dollars and several hundred employees their jobs. I refer to Chuck's recent blabber mouthed letter that the set the stage for the fall of IndyMac bank on July 11th. Once depositors learned of this open letter questioning the banks solvency, depositors lined up and withdrew $1.3 billion in a spectacular run on a bank not seen since the 1930s.

We have recently been treated to a great many blasts from the past. We were treated to the first big run on a bank across the pond when the UK bank Northern Rock suffered a similar line up outside the teller windows as everyone queued up down the block for their funds. Of course this couldn't happen over here in America! Since then we have witnessed a major investment firm, Bear Sterns suffer a corporate run on the bank and now a good old fashioned depositor induced panic. All this despite deposit insurance!

The Bear Sterns announcement at prime time on a Sunday night demonstrates how these things are properly done - behind the scenes in quiet and announced when its a done deal. That way the institution does not implode and investor wealth and taxpayer dollars do not evaporate. In this case we had a grandstanding senator posturing as a protector of the people blowing the whistle before a salvage deal could be worked on. As the former, now unemployed employees of IndyMac wrote to the attorney general: "From the day (Schumer's) letter was made public on June 26 until the closure of the bank, a run on the bank took place and the failure became inevitable." Nice work Chuck!

Chuck presents himself as a person knowledgeable in financial affairs, this event should set them straight. Anyone familiar with these matters knows that investor confidences is paramount to success when an institutions suffers a liquidity crisis. The political machinations of a senator are at variance with what is needed in a time of financial crisis, when discretion is the better part of valor. That is why the Fed was created to get monetary policy away from the political process.

This isn't the first time our elected representatives lust for public appeal has boomeranged on them. During the depression while the banks were on the ropes and in need of the "lender of last resort", namely the Federal Reserve another bunch of well meaning senators and congressmen voted to require a list of the banks receiving loans from the Fed to be published in the best interests of the public. Of course being on that list was a death sentence with depositors queuing up to withdraw what they could as soon as the windows opened.

You would think someone like Chuck who prides himself on being an expert in these matters would know better. You would be wrong.