Banking Law

Allegations of IndyMac's "Backdating": Worse Than We Thought?

A colleague from the West Coast sent along this tidbit from ABC News that apparently documents the efforts of ABC News rodent reporter Brian Ross to chase an unsmiling and silent Darrell Dochow around the block a few times, after which Ross let slip that inside anonymous sources (our favorite type, since cross-examination is impossible) have informed our intrepid scribe that the backdating shenanigans that Dochow is alleged to have allowed at IndyMac are worse than previously reported.

A brewing fraud scandal at the Treasury Department may be worse than officials originally thought.

Investigators probing how Treasury regulators allowed a bank to falsify financial records hiding its ill health have found at least three other instances of similar apparent fraud, sources tell ABC News.

In at least one instance, investigators say, banking regulators actually approached the bank with the suggestion of falsifying deposit dates to satisfy banking rules -- even if it disguised the bank's health to the public.

That's all Ross reports about the "three other instances." The letter from the Treasury Department's Inspector General, Eric Thorson, to Rep. Charles Grassley, that sparked this public dust-up, says only the following about thrifts other than IndyMac:

During our inquiry, we also discovered that OTS had allowed other thrifts to record capital contributions in an earlier period than received.

That's it. There's nothing in there about OTS officials promoting the idea of backdating capital contributions to to thrift management. Nevertheless, Ross' piece is being cited by other "news sources" (for example, The Drudge Report), as "evidence" that other thrifts permitted unsupportable backdating of capital contributions and that the regulators suggested it in at least one case. These are strong accusations, which, if true, could further dim the already-bleak prospects for the survival of the OTS, so we'll see how this plays out. For some reason, until I see some source other than Brian Ross and his "anonymous sources" to vouch for these latest inflammatory accusations, I'll temper my judgment.

The rest of Ross' piece is a rehash of what we already knew about the IndyMac case. Oh, and there are also some bitter words from former FDIC spite-monger Bill Black. Black had his fifteen minutes of fame back in the late 1980s and the early 1990s when he was the Deputy Director of other defunct Federal Savings and Loan Corporation and a critic of all things S&L, especially of John McCain and the rest of the infamous "Keating Five." Black was present for the meeting of The Five with then chairman of the Federal Homes Loan Bank Board Ed Gray and other S&L officials in which the goal was to get the FHLBB and the FSLIC to treat Chales Keating and his giant S&L, Lincoln Savings, "fairly." Black lost that internal political battle when the FHLBB took the investigation away from him, but won the war when Lincoln Savings failed and Keating went to the pokey, and he's spent the ensuing years paying back the FHLBB and its successor agency, the OTS, by appearing on every talking-head TV gig he can hook, and being to the "go-to" guy for every print reporter who needs a "just like the old days" quote for any current banking crisis. He also wrote a book about the collapse of  of the S&L business. His "shtick" is a Michael Scheuer-like riff: "I was right. They were all wrong. Only I was strong and honest. The others were weak and/or corrupt. If they'd only listened to me, this could all have been avoided. But did they? Noooooooooo!"

No matter how correct he may or may not be on substance, the same old act wears thin from constant repetition.

"He's [Dochow's] the person that claimed that he looked into Charles Keating's eyes and knew that Charles Keating was a good guy and therefore ignored all of the professional staff that told him that Keating was a fraud, and he produced the worst failure of the Savings and Loan Crisis at $3.4 billion. Now he's managed more than triple that," said Black, now an economics professor at the University of Missouri in Kansas City, Missouri.

Yes, Bill, Dochow was connected with the Lincoln Savings fiasco. Yes, Bill, we know you got your feathers ruffled in the process. Yes, Bill, you were right AND EVERYONE ELSE WAS WRONG.

It was twenty-odd years ago. Get over it.

Full post as published by Bank Lawyers Blog on January 20, 2009 (boomark / email).