During the fury and carnage of World War I, little thought was given to two shots fired from a small pistol on a leafy suburban street in Sarajevo that killed Archduke Ferdinand and his wife. Gavrilo Princip acquired fame as the man who started World War I only after the upheaval was over and historians had the leisure to trace causes from effects.
Years from now, when the tumult of World Depression II (what is known today as the Great Depression will, like the erstwhile Great War, acquire the number I) seems to lie in the past, an accurate account of its beginning will place the assassin’s pistol in the hand of Charles Schumer, Democrat Senator from New York and Chairman of the Senate Banking Subcommittee. He fired the shots on June 26, 2008 in the form of a public letter he sent to the Federal Home Loan Bank Board of San Francisco and other regulators. His target was Indymac Bancorp of Pasadena, Cal. and, as must have been his intention, he killed it. After the largest bank run since the Thirties resulted from his stunt, federal regulators took the bank over and shut it down.
The world will wonder, as it long has concerning Princip, what were Schumer’s motives in committing his crime against the world? An article buried on Page Three of a Saturday edition of the Wall Street Journal connects the dots, albeit in a manner that disguises a report of aggravated malfeasance as an issue of interparty rivalry as November’s elections approach. Chuck Schumer was just trying to help out a group of big donors to the Democratic Senate Campaign Committee, which the article declined to actually name. The donors were Oaktree Capital Management LP (motto: “Involved in less efficient markets and alternative investments”), a Los Angeles “vulture fund” that specializes in investments in “distressed assets,” along with likeminded firms Thomas H. Lee Partners, Ares Management LLC, Fortress Investment Group LLC.
The article details contributions from the firms and their senior officers to the DSCC and the senatorial campaigns of individual Democrats over the four years that Schumer has been chairman of the fundraising entity. In May, Oaktree’s quest for financial carrion led it to the doors of Indymac Bancorp, to whom it sent a letter offering $1 billion in capital that the struggling thrift obviously needed very badly. Indymac let in a team of Oaktree’s analysts to perform an investigation known in the investment community as “due diligence.” This process yielded Oaktree detailed inside information concerning Indymac’s holdings that were not public knowledge.
But Oaktree’s management decided it wouldn’t care to invest the billion after all. They departed Indymac’s premises, their briefcases bulging with information about Indymac’s assets, including those that would indeed attract them in the event Indymac was broken up under the extreme distress of a bank run and subsequent regulatory dissolution.
And it was four days later that Schumer publicized his letters to regulators about, of all the dozens of similarly stressed financial institutions in June 2008, Indymac Bancorp of Pasadena, Cal. We are invited to be grateful for the vigilance of the Senator from New York, searching whose Web site for the keyword “Indymac” yields nothing whatsoever. But Schumer’s caper was nothing unusual, not for him, nor for other Senators, Congressmen, and campaign-fund raisers everywhere. This one just happened to bring down the house of cards that was the global financial system.
Could Schumer singlehandedly have precipitated today’s financial crises by issuing a public letter about a shaky thrift completely across the United States from the state he represents? Of course not–no more than Princip could send the United States and Germany to war against each other by shooting the heir apparent to the throne of the Austro-Hungarian Empire. Were these tightly focused assaults the proximate causes of their respective debacles? Undeniably.
And the fallout is vastly more than either man could have imagined. Indeed, in denying any particular interest in the remnants of Indymac now being sold by the government for far less than they would have commanded at the time his analysts were searching Indymac’s books for opportunities, Oaktree’s chairman notes, “the rash of institutional failures has presented his firm with a rich smorgasbord of distressed assets.” A rich enough smorgasbord to be sure, not only for all the vulture funds in the world, but for the extension of government power all over the world as well.
Being only 19 years old at the time of his crime, Gavrilo Princip was spared the death penalty and sentenced to twenty years’ imprisonment. He died of tuberculosis in the third year of his imprisonment at Theresienstadt.
Chuck Schumer will celebrate his 58th birthday on November 23.
{ 13 comments }
And with a sigh he says “wow” to no one in particular.
N. Joseph Potts,
If it went down as you say it did then you should be up for a James Bovard award. Schumer bringing down a bank so that democrat donors could grab the pieces of the wreckage, at bargain prices since they previously and exclusively evaluated the said bank and thereby gained an extra advantage, is really heinous.
It is not just the Machiavellian attitude of the Senator that is disgusting. Rather, it is the feeling of powerlessness in the face of it that is sickening. Down with Schumer! To hell with the whole lot of them. Secession may be the best option now, logistics aside…
Indymac was essentially doomed well before Schumers letters (look it up in the wikipedia). So, this article is nothing more than ‘shoot the messenger’, and obviously politically motivated.
The difference with Countrywide that found shelter with BoA five months earlier was that Indymac was not able to find a buyer anymore. And already in august 2007 the large American Home Mortgage had filed for bankruptcy.
Being the seventh largest mortgage originator in the United States Indymac was not just one ‘of all the dozens of similarly stressed financial institutions in June 2008′.
As the Chairman of the Senate Banking Subcommittee, for Schumer to turn his attention ‘completely across the United States’ is not quite so remarkable as the author seems to suggest.
With no more than a handful of exceptions the entire Congress is a flock of rent-seeking vultures for their contributors like JP Morgan Chase and Goldman Sachs.
Secede? I second the motion.
Secession may be logistically much too difficult. I believe an exodus of liberty-lovers would be much more prudent and effective. We need to find a way to join those who favor liberty in pursuit of a new stateless state.
As much of a tool as Chuck Shumer is, the seeds of this problem were planted before he was even born.
It is indeed very sad that the gatekeepers of the state have not only opened the gate but they now refuse to close it and clean up the mess. Shame on both your houses!
My guess is that there were multiple assassins and multiple targets, the Bear Stearns and Lehman Brothers takedowns have to be ranked up there with Indy Mac.
Anyone else remember how the character positioned quite a bit like Schumer meets his end in John Ross’ _Unintended Consequences_?
Sorry, but if your business can collapse just because people ask you to honor your obligations, you weren’t very sound to begin with.
If it’s *expected* that you not be able to honor your obligations, maybe the entire sector is in for a restructuring…
“From both ends? What a player!”
Schumer is either obtuse, or a criminal. Take your pick. Same with Harry Reid, who during one recent four-day period managed to utter these words–”we don’t know what to do”; “a large insurance company is on the verge of bankruptcy”, and later in the day through one of his minions “the Senator has no direct knowledge of regarding an insurance company declaring bankruptcy”–after The Hartford shares plumeted 40%.
At the center of this mess is long-term political power grab. It started in 1938, and continues today. There is only one common thread–the Democratic Party.
Although I agree for the most part Charles. I found the republican party at fault too. At some point in time, they lost their backbone to stand up for what’s right. I am extremely disappointed with the quite a few republicans. Having lived in a socialistic society, it was a life I pray never to visit again. I know it’s tough times for republicans but it shouldn’t equate to completely having no spine to stand up for what’s right.
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