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Treasury Inspector ‘Quits’ Over IndyMac

From ABC News:

Scandal at Treasury: Official Quits Amidst Fraud Scandal

Darrel Dochow Allowed IndyMac Bank to Cook Its Books, Investigators Say


March 5, 2009—The man at the center of a fraud scandal at the Treasury Department has been allowed to quietly quit and retire from his job as a government regulator, despite allegations that he allowed a bank to falsify financial records and amidst outcries from investigators who say the case shows how cozy government regulators have become with the banks and savings and loans they are supposed to be checking on.

Darrel Dochow, the West Coast regional director at the Office of Thrift Supervision who investigators say allowed IndyMac to backdate its deposits to hide its ill health, quit last Friday. Prior to his leaving, Dochow was removed from his position but remained on the government payroll while the Inspector General’s Office investigates the allegations against him.

Treasury Department Inspector General Eric Thorson announced in November his office would probe how Dochow allowed the IndyMac bank to essentially cook its books, making it appear in government filings that the bank had more deposits than it really did. But Thorson’s aides now say IndyMac wasn’t the only institution to get such cozy assistance from the official who should have been the cop on the beat.

Investigators say Dochow, who reportedly earned $230,000 a year, allowed IndyMac to register an $18 million capital injection it received in May in a report describing the bank’s financial condition in the end of March…

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

One former regulator says Dochow’s actions illustrate the cozy relationship between banks and government regulators.

"He did nothing to protect taxpayers in losses," former federal bank regulator William Black told ABC News. "Instead of correcting it [Dochow] made it worse by increasing the accounting fraud."

Meanwhile, IndyMac customers who lost their savings are demanding answers and are further infuriated after learning Dochow was also the regulator in 1989 who oversaw the failed Lincoln Savings and Loan, a scandal that sent its CEO Charles Keating to prison.

"He’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.

Following the Lincoln scandal, Dochow was demoted and placed into a relatively obscure office, but later, inexplicably was brought back into the Office of Thrift Supervision…

While Dochow could end up losing his job, neither he nor his colleagues are expected to go to prison.

"This is criminal with the small ‘c’," said Black. "No one within the regulatory ranks may go to jail, but they have done the worst possible disservice to the taxpayers of America."

Perhaps Mr. Dochow has resigned to take some even higher paying job in the Obama administration.

But why shouldn’t he go to jail?

Instead, our hero will undoubtedly be allowed to retire gracefully, with his full fat government pension and gold plated healthcare benefits intact.

That this selfsame gentleman played a pivotal role in the Savings & Loan debacle shows that federal bureaucrats have nothing to fear, no matter how badly they screw up.

And, yes, as the article suggests, this does tend to indicate that the relationship between the banks and the government has been far too cozy.

It also shows that the cries of “lack of regulation” are misplaced. The regulations were there.

They were just ignored.

This article was posted by Steve on Thursday, March 5th, 2009. Comments are currently closed.

9 Responses to “Treasury Inspector ‘Quits’ Over IndyMac”

  1. MinnesotaRush says:

    Might this crook be one of Banking Queen Fwank’s “strange bedfellows”? Third cousin by marriage to Dodd?

    By the way .. just how long was it that Madoff seemed to fly under the radar of the host of gov’t. agencies and regulators/watchdogs??? Just a brief 50 years or so, was it???

    Disgusting! All of it!

  2. proreason says:

    Yesterday I posted a Slimes article in Correspondent News which discussed AIG’s role in the financial crisis.

    That article (which appeared to be real reporting, not the usual propagand) stated that “international rules” were established in the late 90’s that allowed banks to effectively set their own risk ratings. This was accomplished by using AIG’s AAA rating as firewall proof of a second banks credit-worthiness. Well, AIG was at the time taking on enoromous risk, in violation of it’s own AAA rating and public trust.

    The key point relating to Steve’s current article is that AIG’s London branch was responsible for the device/trick/process that made this possible, which acted as a coiled spring for the entire financial system. And it was done with REGULATOR APPROVAL.

    So much for the value of government regulation.

    The only thing regulators are good for is slamming the barn door shut after the cows are gone.

    It’s another radical liberal canard to destroy free markets and implement a 2-class society……the government rulers, and the rest of us.


    For some reason, i was able to read the Slimes article yesterday without a password. Today it is blocked, perhaps because it is in the archives

  3. Reality Bytes says:

    An inside look at Treasury…;-)


  4. jr says:

    i would sure like to here any comments from former indymac depositers! are there any out there who would like to tell us whats going on with your deposits?

  5. Gladius et Scutum says:

    To paraphrase an old saw “When buying and selling are controlled by the regulators, the first thing to be brought and sold are the regulators”.

    I invesigate fraud in private industry, occasionally reviewing my clients’ government contracts. These are the worst. Purchase (bribing) of the government oversight is ubiquitous.

    White collar crime is rarely prosecuted, although I have taken about 20 cases to criminal, and perhaps a dozen to civil, court. When clients decline to prosecute, they generally cite any or all of three reasons: Firstly, that it would hurt the firm’s reputation (I din’t buy into this). Secondly, that there is little chance of significant recovery, but an excellent chance of sending the offender(s) to work for the competition. And thirdly, that the money actually belonged to a third party, and my client would prefer not to simultaneously compensate them and lose the account (morally questionable).

    Excellent job security, but very disheartening.

  6. GetBackJack says:

    To quote Gomer Pyle … surprise, surprise, surprise.

  7. pdsand says:

    He was from the Government, and he was there to help.

  8. Colonel1961 says:

    ‘…retire from his job…’ But, of course, we wouldn’t want him to lose his hard-earned retirement benefits.

    1st, do you still have that fine length of rope, sir? I have a modest proposal…

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