Corruption, Vultures & A Letter...

This is interesting.

The more sophisticated examples of corruption hide the causality of action nicely, with kickbacks heading not to those who want to profit directly, but indirectly to benefit those who the corrupt officials want to benefit. This can mean financing a political group who attacks his opponent, for instance, without being paid for directly, or getting something lobbied that the politician wants.

The key to the corruption is, however, the quid pro quo: the deal. Finding the deal is the hard part.

This deal appears to be clear: for no good reason - or has anyone found one? - Charles Shumer bad-mouthed IndyMac and caused the bank run that was the death blow to that bank.

Now it is being bought at what is called a "distressed" price, meaning that they will be paying a few cents on the dollar.

Shumer is Democratic Senator from New York. He's not merely any senator, but is in the Democratic Leadership Team.

Soros and his fellow investors are key financiers to the Democratic Party.

This is a classic case of corruption: essentially an impairment of integrity, virtue or moral principle; an inducement to wrong by improper or unlawful means.

In this case, the US taxpayer is paying. IndyMac probably wouldn't have gone under if Shumer hadn't bad-mouthed it (by publicly saying that the bank was in trouble when it wasn't), and now his financiers are apparently buying assets worth in excess of $200 bn for only around $1.5 bn, with the US taxpayer covering around $10bn in losses.

Again, remember that Shumer is Democratic Senator from New York, not any senator, but one that sits on the committees that have oversight of the banking system. He made the letter public.

Interestingly enough, IndyMac was completely apolitical, and gave no contributions to any campaigns. That is apparently a part of the problem: Shumer collected hundreds of thousands in campaign contributions from companies that have gone as badly as IndyMac, but where he didn't make it public.

Given that he sits on these committees, you'd have thought that he'd know that it is reckless and grossly irresponsible for him to question the liquidity of a bank publicly unless he actually wanted the bank to collapse.

His comments lead the stock to lose 25% of its worth and saw bank customers withdraw $1.3bn in 10 days, effectively ruining the bank.

Some 10 mn shares were shorted.

Now, IndyMac had problems, problems from the structural mistakes that have led to the financial crisis.

But they were trying to deal with them, and while they might have ended up in Chapter 11, they'd have remained at least a going concern.

Shumer's actions led them to file Chapter 7 instead, which abandons the idea of keeping the company alive and simply closes it down. Assets are disposed of with the hope of getting something for them, but this usually turns out only to be profitable for vulture funds and the like.


Now we know who else.