Of Democrats and Stupid Lending Practices
By jimrob | July 12, 2008
IndyMac Seized by U.S. Regulators; Schumer Blamed for Failure
The Federal Deposit Insurance Corp. will run a successor institution, IndyMac Federal Bank FSB, starting next week, the Office of Thrift Supervision said in an e-mail yesterday. The regulator blamed U.S. Senator Charles Schumer for creating a “liquidity crisis” after a letter on June 26, in which he expressed concern that the bank may fail.
The Pasadena, California-based lender specialized in so-called Alt-A mortgages, which didn’t require borrowers to provide documentation on their incomes. The demise adds to the crisis caused by the subprime collapse and may mean regulators will have to raise more money to support the federal deposit insurance program that repays customers when a bank fails.
What kind of bank loans huge amounts of money to people without requiring proof of income? That is absolute stupidity. This bank deserved to go under.
“IndyMac is the vanguard, the precursor of more stuff coming,” said Christopher Whalen, managing director of Institutional Risk Analytics, a market research company in Torrance, California. “It’s not surprising to see IndyMac resolved. What you have to ask is what’s coming next. It’s going to be a wave of medium to bigger-than-medium institutions.”
IndyMac’s home state, where Countrywide Financial Corp. was also located before it was bought last week, has been among the hardest hit by foreclosures. California ranked second among U.S. states, with one foreclosure filing for every 192 households in June, 2.6 times the national average.
Why am I not surprised at a high foreclosure rate in a state with a hugely overrated and overinflated housing market?
Houses are not an investment. They are shelter. You buy a home to keep you dry, house your possessions, and give you a place to live. You don’t buy a home to “flip it.” People like that are doing more to contribute to the downfall of the American economy than anything else.
Take a home that a family with a modest income could afford, dump a bunch of money into it, and leave that family unable to purchase said home. Brilliant idea, isn’t it? I’d almost be in favor of a law that requires you to reside in a home for a number of years after purchasing it.
It seems a Democrat, a particularly whiney and snivling anti-American one at that, touched off this whole fiasco.
IndyMac came under fire last month from Schumer, the Democrat from New York, who said lax lending standards and deposits purchased from third parties left it on the brink of failure. During the 11 business days after Schumer explained his concerns in a June 26 letter, depositors withdrew more than $1.3 billion, the OTS said.
“This institution failed due to a liquidity crisis,” OTS Director John Reich said in the statement. “Although this institution was already in distress, I am troubled by any interference in the regulatory process.”
Of course, the high-and-mighty Democrat was taken aback by criticizms of him. What right does a mere housing regulator, someone who obviously knows how the housing market (shady as it may be) works, have to criticize him, a flag-wavin’ United States Senator. And a Democrat one at that!
Schumer blamed IndyMac’s own actions and regulatory failures for the bank’s seizure.
“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,” Schumer, a New York Democrat, said in an e-mail yesterday. “Instead of pointing false fingers of blame, OTS should start doing its job to prevent future IndyMacs.”
You mean these poor lending practices encouraged by Democrats? These same Democrats who passed legislation requiring mortage lenders to provide loans to people with hardly any financial stability under the false premise that home ownership is key to success? These same Democrats that would whine and moan about discrimination and unfair practices when poor inner-city black people with part-time jobs couldn’t get a home loan?
But Mr. Schumer is a Democrat. He’s never wrong. Who am I, a lowly rural American who thinks of a house as shelter, not an investment, to criticize?
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