IndyMac backdating helped downfall
The FDIC takeover of failing bank IndyMac in July cost several billion dollars. But the maneuver may have been avoided if not for a cover-up that allowed the bank to continue operating while nearly out of money. Steve Henn reports.
Customers line up in front of an IndyMac Bank branch in Santa Monica, Calif (Gabriel Buoys/AFP/Getty Images)
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Scott Jagow: One of the major reasons the financial system needed a bailout was the possibility of massive bank failures and panics. Some banks did, in fact, go under -- like IndyMac. Wiped out stockholders completely. But now we've learned that bank regulators not only saw trouble coming at IndyMac, but one of them appears to have helped the bank cover it up. Steve Henn has the story.
Steve Henn: According to the Treasury Department's Inspector General, Eric Thorson, a regulator at the Office of Thrift Supervision allowed IndyMac to backdate an infusion of new capital lasts spring. The new cash let the bank appear healthy in public filings, when in fact it had so little money, normal rules would have required it to stop accepting brokered deposits.
Bert Ely: This capitol window dressing that took place allowed IndyMac to stay open at least another couple of months.
Bert Ely is a banking consultant. He says the maneuver probably cost the FDIC millions, if not billions, when it was finally forced to take the bank over in July.
Republican Sen. Charles Grassley of Iowa is outraged.
Sen. Charles Grassley: What was done in the case of IndyMac was a violation of law costing the FDIC $8 [billion] to $9 billion.
According to Inspector General Thorson, other thrifts like Indy Mac were also permitted to backdate capital infusions on their public filings. But just which banks were involved hasn't been revealed.
In Washington, I'm Steve Henn for Marketplace.
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