The largest blow up of a bank happened last week and fingers are being pointed in Washington. It seems that the blame game is rather fierce in DC these days, with fingers pointed to speculators for high oil prices, Alan Greenspan for creating the Real Estate Bubble, and Ben Bernanke for creating massive inflation. You never read about this when times are good and people are gorging themselves on "easy money."
Remember this, there's no such thing as easy money, anywhere. If it looks easy, its probably attached with some hidden risk somewhere. So now with IndyMac's failure this past Friday, tied directly to the subprime mortgage market, the Office of Thrift Supervision (OTS) is blaming NY Democrat Chuck Schumer for creating a bank run panic after he expressed concerns about IndyMac's viability.
OTS announced Friday that it was taking over the $32 billion IndyMac and transferring control to the Federal Deposit Insurance Corporation - and the agency pointed the finger directly at Schumer for the failure, accusing him of sparking a bank run by releasing a letter that "expressed concerns about IndyMac's viability."
"In the following 11 business days, depositors withdrew more than $1.3 billion from their accounts," the OTS said in a statement announcing the California-based lender's takeover. The statement included a quote from OTS Director John Reich saying, "Although this institution was already in distress, I am troubled by any interference in the regulatory process." [via CNN]
I'm glad he expressed his concern but this is just the tip of the iceberg for bank failures. I believe that we'll see only a fraction of the bank failures we saw back in 80's with the Savings and Loans scandal, but the damage will be massive.
As more and more money gets concentrated in fewer banks, you can expect any future failures to be spectacular and destructive. I wonder who'll be to blame when the next bank fails.
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