As one who placed mortgages with Indy Mac, I can report that Indy Mac was run honestly, and did not grant loans imprudently. But when the normal loan to value ratio on a mortgage is 80%, and house prices drop by 30% (as in Los Angeles, where Indy Mac was headquartered), the loan becomes over 100% of the house’ value, and the borrower may just walk away. Indy Mac could have sold its remaining assets and gradually gone out of business, but Senator Schumer made sure he released his letter to the press – the financial equivalent of crying “Fire!” in a crowded theater. Why would he do this? First, Schumer is a publicity hound: the only Seator whose name is a verb, “to Schume” is to rush toward the nearest microphone or camera, regardless of the consequences. Second, Schumer is the head of the Senate Democratic Campaign Committe, and this is his way of shaking down the remaining bankers for campaign contributions: contribute or I’ll put you out of business too. Think of it as a protection racket, financial McCarthyism and extortion.
