by Calculated Risk on 7/03/2008 01:28:00 AM

From the LA Times Money & Co: Regulators to Schumer on IndyMac: Please shut up

From a letter to Schumer today, John M. Reich, director of the Office of Thrift Supervision wrote:

"Dissemination of incomplete or erroneous information can erode public confidence, mislead depositors and investors, and cause unintended consequences, including depositor runs and panic stock trades. Rumors and innuendo cause damage to financial institutions that might not occur otherwise and these concerns drive our strict policy of privacy."

The LA Times also quotes John D. Hawke, the U.S. comptroller of the currency (regulator of national banks) from 1998 to 2004:

"If Schumer continues to go public with letters raising questions about the condition of individual institutions, he will cause havoc in the banking system," Hawke said.

"Leaking his IndyMac letter to the press was reckless and grossly irresponsible. I don't see how he can be trusted with confidential information in the future. What this incredibly stupid conduct does is put at risk the willingness of regulators to share any information with the [congressional] oversight committees. After this, you'd be crazy to share information with Schumer."

I agree. Naming an individual institution was reckless and irresponsible. I was very surprised that a letter like Schumer's was made public.