Senator Chuck Schumer - A Hedge Fund Tool?
Could Senator Chuck Schumer have been a Hedge Fund Tool?
Donald Luskin summed up the whole sad story with an article from the Wall street Journal, and some interesting thoughts of “Mike Danger”
For those of you who have not followed the federal take over of IndyMac Bank - Schumer is the person who publicized a letter to the banks regulator last month,claiming the bank could face collapse, which in the end probably caused enough panic with the depositors to indeed collaps the bank.
Schumer Claims he was just doing his job.
The Office of Thrift Supervision (OTS) begs to differ.
” the immediate cause of the closing was a deposit run that began and continued after the public release of a June 26 Letter to the OTS and Te FDIC from Senator Charles Schumer of New York…. Int the following 11 business days, depositors withdrew more than $1.3 billion from their accounts”
Said the OTS in a press release.
Donald Luskin quotes Mike Danger saying:
The SEC is investigating hedge funds to see if they circulate rumors, knowing they are false, and trade on them, manipulating the market. Now, did the brave writers at the WSJ miss something?
Someone — with an interest — brought Schumer information on IndyMac. Who? When? Why? What are the chances that Schumer was looking into irregularities into IndyMac because some hedgie with a big short position turned him onto it?
Well, they ain’t zero.
What are the chances Schumer was “investigating” IndyMac because the Senate Banking Committee assigned that case to him? Zero.
What are the chances the SEC enforcement guys will get very shy, very fast if they pick up a trail leading up the Hill? Close to 100%. (Note, Senators have a constitutional shield against certain prosecutions of actions taken in the course of their work as Members of Congress.)
Most likely result? The SEC staff will pluck a few hapless hedgies out of the middle ranks and shoot them in the public square.
Is Schumer correct? Or did Schumer break a law by leaking his letter? What if he were a research director at a hedge fund and told people what he suspected? Would that be the kind of rumor the SEC is hunting?
Think there might be a clever hedge fund which might use Schumer to leak info so they can trade on it without fear of prosecution? Uh, yeah.
That is pretty scary, if you take into account that hedge funds bet not only on growth but on market falls….
