Get Your Mortgage Rate Quote in Just 30 Seconds

Mortgage rates change every day, and your rate will vary based on your location, finances, and other factors. Get your FREE customized rate comparison below.

OTS at Heart of Bank Crisis

OTS at Heart of Bank CrisisRegulator oversaw failures of IndyMac, BankUnited and WaMu

June 9, 2009

By staff

BankUnited, IndyMac Bank F.S.B. and Washington Mutual Bank had one thing in common; they were all failed institutions overseen by the Office of Thrift Supervision. The agency admitted it was asleep at the wheel in its role as lead regulator for American International Group Inc.

Last year, four OTS-regulated financial institutions including IndyMac, WaMu and Downey Savings and Loan Association, F.A., failed. Through last month, the OTS — which regulated only 810 thrifts as of Dec. 31, 2008 — had already seized four institutions this year including BankUnited.

The agency also was the lead regulator for AIG — which has received $170 billion so far in help from the U.S. government as a result of losses from its financial services division, according to an episode of This American Life.

AIG opened a small savings bank in 2000. Even though the thrift represented only 1/1,000 of the company’s business, the move enabled AIG to establish the OTS as its lead regulator.

Interim OTS director Scott Polakoff admitted to Congress that his agency was responsible for the lack of oversight at AIG.

“It’s time for OTS to raise their hand and say we have some responsibility and accountability here,” Polakoff said in U.S. Senate testimony played on the episode entitled The Watchmen. “This entity was deemed a savings and loan holding company.

“We were deemed an acceptable regulator for both U.S. domestic and international operations.”

Polakoff was placed on leave earlier this year as the U.S. Department of the Treasury investigated OTS complacency in the backdating of capital contributions in August 2008.

This American Life went on to report that the OTS is the successor to the Federal Home Loan Bank Board — which was abolished after the savings and loan debacle. But the OTS operated out of the same location with the same employees as its defunct predecessor.

Staff and management at the regulator feared the potential loss of their agency as regulated institutions which fed its revenues were dwindling, according to the story. So they attracted prospective institutions with the promise of lower regulation.

But despite the OTS admission, the show went on to point to other culprits, such as ratings agencies and the Commodities Futures Modernization Act passed in 2000 — which prevented regulation of the derivatives like those that sank AIG.

next story

back to current headlines

Popular posts

7 Refinance Strategies
7 Refinance Strategies

Refinance to a lower interest rate: If interest rates have dropped since you took out your original mortgage, refinancing to a lower rate can help you save money on your monthly payments and reduce the overall cost of your loan. Refinance to a shorter loan term:...

7 Refinance Strategies
Is Refinancing With Your Present Lender Preferable?

Do Not Accept the First Refinancing Offer You Receive Homeowners should not accept the first refinancing rate provided to them. This is particularly important if you are applying with your existing lender. Some mortgage lenders have mechanisms in place that prioritize...


Don’t worry, we don’t spam

calculate your monthly mortgage payment

Related Topics

Helpful Links

Daily mortgage rate trends

Best mortgage lenders

First-time homebuyers programs by state

Loan limits by state

Types of mortgages

APR vs interest rate

Understanding PMI

Related Posts

Fannie Mae Profile

Fannie Mae Profile

Last Updated December 27, 2018 7:38 PM Central   full list | other directories | bank search | SEC...