IndyMac-n-Squeeze

Friday afternoon, Megan Barnett wrote that Wall Street needed Xanax. By Friday evening, when Federal regulators seized IndyMac Bancorp, a big mortgage lender, the U.S. markets may have needed something a bit stronger to get threm through the weekend.

The wobbly market--currently roiled by worries over Fannie Mae and Freddie Mac and glaring weaknesses among Wall Street giants--won't be helped by the third-largest bank collapse in U.S. history. IndyMac's demise is bound to ratchet up the anxiety and intensify the finger-pointing.

Already, according to the Wall Street Journal, Sen. Chuck Schumer and Office of Thrift Supervision boss John Reich are blaming each other. Reich accusing Schumer--whose devotion to the Sunday afternoon press conference and sound bite is legendary--of prompting a run on the bank with a critical letter in June. Schumer, meantime, sounds off on what he see as lax oversight by Reich's OTS.

In a time where Wall Street stalwarts Jamie Dimon and Dick Fuld are spending ample time whining about rumors in the market and whisper campaigns against particular stocks, Schumer and Reich's faceoff threatens to take the spotlight off the real issue: the mortgage market was spinning out of control for years before anyone in Washington uttered a word and anyone on Wall Street was moved to worry beyond their next bonus.

Now, according to the FDIC, five banks have been shut down in 2008, two more than were shuttered in all of 2007.

The Journal reported IndyMac's collapse is expected to cost the Federal Deposit Insurance Corp. between $4 billion and $8 billion, slicing roughly 10 percent of the FDIC's $53 billion deposit-insurance fund.

Monday morning, the bank will reopen, run by the FDIC. The pressure on Fannie and Freddie will still be heavy, the Fed will still be stuck between trying to navigate a recession and attack inflation, and investors are likely to be hit hard again.

None of this is the fault of the rumor-mongers. It is the consequence of a national economy that relied too long on cheap and easy money, a regulatory network more inclined to look away than anticipate and a Wall Street eager to ramp up risk for the sake of growth with almost no regard to the fallout.

So, Wall Street will keep popping Xanax and our men and women in Washington will be getting ready for the next round of the blame game.

Dan Colarusso