Fallout: The Financial Crisis

IndyMac not alone in book-cooking

Steve Henn Dec 24, 2008
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Fallout: The Financial Crisis

IndyMac not alone in book-cooking

Steve Henn Dec 24, 2008
HTML EMBED:
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TEXT OF STORY

Steve Chiotakis: We could hear today who the new owner of IndyMac Bank will be.
The FDIC’s been running it since the California-based bank collapsed. And now it’s only a small piece of its former self. Customers have been pulling money out of the bank since it was seized. The failure could cost the federal deposit insurance fund billions of dollars.

And we’re hearing more about what was going on in the months leading up to the collapse. Federal bank regulators allowed IndyMac to let the bank do some book-cooking, so it didn’t have to stop accepting some forms of deposits. Marketplace’s Steve Henn reports IndyMac apparently wasn’t alone in its accounting game.


Steve Henn: In a conference call with IndyMac CEO this May, Darrel Dochow, a high-ranking federal regulator, agreed to allow IndyMac to backdate $18 million in capitol contributions, recording the cash as an asset on its books six weeks before it was actually received.

John Coffee: I think it’s very troubling from an ethical perspective.

John Coffee is a law professor at Columbia University:

Coffee: It’s not really clear whose side the regulator is on.

Regulators at the Office of Thrift Supervision or OTS, where Dochow was a regional director, allowed other banks to do the same thing, according to Treasury Department’s Inspector General Eric Thorson. Dochow was also the regulator in charge of overseeing Washington Mutual and Countrywide.

Eric Thorson: Well we don’t know yet whether they also engaged in the same behavior. But if it were to turn out that the same kind of backdating occurred at all three of these institutions, I think that will be a real stain.

Officials at OTS said they were unaware of the backdating until the inspector general’s report, and said Dochow has been temporality removed from his job.

In Washington, I’m Steve Henn for Marketplace.

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