WASHINGTON – A top bank regulator has been placed on leave pending a Treasury Department investigation into regulators' approval of backdated cash infusions for troubled thrifts.
The Office of Thrift Supervision said Thursday that its acting director, Scott Polakoff, was placed on leave "pending a review by the Department of the Treasury of the OTS' August 2008 actions related to post-period capital contributions."
Treasury Secretary Timothy Geithner named OTS Chief Counsel John Bowman to replace Polakoff as acting director, the agency said. The OTS gave no further details on the Treasury Department's review and how it might relate to Polakoff.
Polakoff, who is the agency's chief operating officer, had held the acting-director position only since last month following the resignation of OTS Director John Reich. Agency spokesmen and Polakoff could not be reached for comment late Thursday.
Late last year it was revealed the OTS had approved in May a backdated infusion of $18 million for IndyMac Bancorp to March 31, allowing it to meet first-quarter government requirements for reserves held against possible losses.
Pasadena, Calif.-based IndyMac failed in July and cost the federal insurance fund for banks nearly $9 billion. The OTS removed Darrel Dochow, the agency's official in charge of the Western region, from that position and he later resigned from the agency.
Treasury Department Inspector General Eric Thorson wrote in a letter to members of Congress that the OTS had also allowed other thrifts to record capital infusions in an earlier period than when they were received.
Thrifts have been the most troubled regulated institutions during the financial crisis and among the most spectacular failures.
By law, they must have at least 65 percent of their lending in mortgages and other consumer loans — making them particularly vulnerable to the housing downturn. Seattle-based thrift Washington Mutual was the largest bank to collapse in U.S. history, with around $307 billion in assets. It was later acquired by JPMorgan Chase & Co. for $1.9 billion.
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