Dec 22, 2008

Magical accounting at IndyMac

The Office of Thrift Supervision has "removed" a top banking regulator for allowing IndyMac Bancrop to use accounting gimmickry to cover up its financial frailty. The Washington Post reports:

A senior federal banking regulator has been removed from his job after government investigators concluded that he knowingly permitted IndyMac Bancorp to present a misleading picture of its financial health in a federal filing only months before the California thrift was seized by regulators.

The Office of Thrift Supervision removed Darrel Dochow as director of its western region, where he was responsible for regulating several of the largest banks that failed or were sold in the past year, including Washington Mutual, Countrywide Financial, IndyMac and Downey Savings and Loan.


Dochow was appointed regional director in September 2007 after serving as the No. 2 in the western region. He was paid $230,000 in 2007, according to government records. Dochow got the job shortly after playing a leading role in persuading Countrywide to move under OTS supervision, a major coup for the agency, which is funded by fees from the companies it oversees.

In the late 1980s, Dochow had been the chief career supervisor of the savings-and-loan industry, and federal investigators later concluded he played a key role in the collapse of Charles Keating's Lincoln Savings and Loan by delaying and impeding proper oversight of that thrift's operations.

Gee, it's hard to imagine what went wrong...

At the time of IndyMac's failure, which has cost taxpayers $8.9 billion, the head of the OTS, John Reich, pinned the blame on Sen. Chuck Schumer, D-New York. Reich said Schumer scared investors with a letter raising questions about the bank's solvency. When asked about Dochow's role in the bank's collapse, Reich "described Dochow's actions as a 'relatively small factor in the events leading to the failure of IndyMac,'" according to the Post.

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