Bank Regulator on Leave Pending Inquiry
Inspector General Says OTS Allowed False Statements
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Friday, March 27, 2009
One of the nation's chief bank regulators has been placed on leave pending the results of an investigation into his agency's role in allowing several banks to falsify financial statements.
The Office of Thrift Supervision announced the sudden replacement of Scott Polakoff as acting director yesterday evening. The agency is a unit of the Treasury Department that regulates banks focused on mortgage lending.
Polakoff was removed while the department reviews findings by its inspector general about "certain actions taken by management" at the OTS, according to a Treasury statement. A spokeswoman declined to elaborate.
The Treasury's inspector general is investigating a number of instances in which OTS employees allowed banks to exaggerate their financial health in required filings by including money they did not receive until after the reporting period.
The inspector general has already found that the senior OTS official in the western United States, Darryl Dochow, allowed IndyMac Bancorp to overstate its financial health just weeks before the California mortgage lender was seized by regulators. Dochow was relieved of his duties and later agreed to resign.
In a letter to members of Congress, the inspector general, Eric Thorson, said several other banks were allowed to commit similar violations. The OTS itself has since acknowledged four other episodes.
Polakoff was the agency's second-in-command during the period in question. He was appointed acting director in February after John Reich retired.
Polakoff could not be reached to comment, and an OTS spokesman declined to elaborate on Polakoff's suspension.
John E. Bowman, the agency's deputy director and chief counsel, was appointed by Treasury Secretary Timothy F. Geithner as acting director in Polakoff's place.
