PrintOctober 19, 2008
Chuck Schumer has a lot of explaining to do
Susan Schmidt of the Wall Street Journal has discovered a disconcerting coincidence: Senator Chuck Schumer took a highly unusual step of publicly criticizing a bank, sparking a run on it, just as big Democrat hedge fund donors were examining assets of the bank in hopes of buying them on the cheap should the bank fail.
Schumer of course denies any impropriety. But the odor from this is very, very bad. If a Republican had done something like this, the headlines and network news features would be screaming for his head.
Read the excellent article here. A few samples:
Sen. Schumer's office said recently he didn't know anything about Oaktree's possible interest in IndyMac until after the bank failed. Oaktree Chairman Howard Marks said he never talked to the senator about IndyMac. [....]
The group of investors led by Oaktree are big political contributors, predominantly to Democrats. They have donated more than $700,000 to Senate Democrats and the Democratic Senatorial Campaign Committee during the four years that Sen. Schumer has chaired the campaign committee.
Oaktree's Mr. Marks gave the Democrats' Senate Campaign Committee $20,000 in late March. Executives of his firm and three other equity firms that considered investing in IndyMac along with Oaktree -- Thomas H. Lee Partners, Ares Capital Management LLC and Fortress Investment Group LLC -- have been generous donors to the DSCC under Sen. Schumer's chairmanship, as have many Wall Street financial-services firms.
Mr. Marks said he is a longtime Democratic donor and has gotten fund-raising calls from Sen. Schumer. But, he said, "I know him socially. I've never talked business with him." [....]
We were interested in taking a look," said Mr. Marks. His firm has raised $11 billion this year to invest in distressed assets. "We're bargain hunters. And we have a long history in distress," he said.
The investors knew after a few days of due diligence in mid-June that they weren't interested in buying the bank, said Mr. Marks. He read from a June 22 email from Oak Tree managing director Skarden Baker, who was assessing IndyMac's business. "I am taking the view of doing enough here to jump in if it goes to receivership," wrote Mr. Baker.
Four days after the email was sent, Sen. Schumer released publicly letters he sent to bank regulators and to the Federal Home Loan Bank of San Francisco. "I am concerned that IndyMac's financial deterioration poses significant risks to both taxpayers and borrowers," the senator wrote, warning that "the bank could face a failure if prescriptive measures are not taken quickly."
Hat tip: Ed Lasky
