$1.3 billion in losses, brought to you by Chuck Schumer
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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
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