When the Office of Thrift Supervision (OTS) declared IndyMac dead and turned the corpse over to the FDIC for burial, it declared the cause of death to be homicide. The bank was done in, according to the OTS statement, by the actions of Sen. Charles Schumer (D-N.Y.).

Sen. Charles Schumer (D-N.Y.)

The OTS stated, “The immediate cause of the closing was a deposit run that began and continued after the public release of a June 26 letter to the OTS and the FDIC” from Schumer. “The letter expressed concerns about IndyMac’s viability. In the following 11 business days, depositors withdrew more than $1.3 billion from their accounts.”

“This institution failed … due to a liquidity crisis,” OTS Director John Reich said. “Although this institution was already in distress, I am troubled by any interference in the regulatory process.”

Reich did not mean to say that the bank would not have failed without Schumer’s release of his letter, which criticized the institution’s reliance on brokered deposits and Federal Home Loan Bank advances. The OTS admitted the bank had been in a “precarious financial situation” induced by stresses in the residential real estate market and last year’s abrupt disappearance of the secondary mortgage market. In addition, the OTS had “significant concerns” with the institution’s funding strategy and had ordered a number of changes.

On the other hand, IndyMac was negotiating a “significant capital infusion” when Schumer’s ham-handed, public intervention occurred. The institution might have failed even if Schumer had not engaged in his publicity stunt, but when he did so, IndyMac was doomed.

As you might expect, Schumer pleads innocent. “If OTS had done its job as regulator and not let IndyMac’s poor and loose lending practices continue, we wouldn’t be where we are today,” he said. “Instead of pointing false fingers of blame, OTS should start doing its job to prevent future IndyMacs.”

However, some knowledgeable observers thought Schumer might have served the public interest better by conveying his concerns to the OTS in a more private fashion. “What this incredibly stupid conduct does is put at risk the willingness of regulators to share any information with [Congress],” declared former Comptroller of the Currency Jerry Hawke. “After this, you’d be crazy to share information with Schumer.”