This past week, the Treasury Department's
Office of Thrift Supervision Issued a
Prompt Corrective Action Directive to $14 billion holding company BankUnited of Coral Gables, Florida's largest financial services firm.
From Zero Hedge:
(BankUnited) was told by its regulator, the Office of Thrift Supervision, to find a buyer who would raise its depleted capital to acceptable levels or risk a government takeover. In an ominously sounding "prompt corrective action directive", the OTS has essentially given the bank a 20 day ultimatum.
Per an American Banker story that was reprinted in the Miami Herald last week, "
Banking inspector probed over BankUnited report," this appears to be just the latest incident in a now-emerging history of OTS' bank regulators rampantly aiding and abetting the deliberate misrepresentation of numerous banks' balance sheets throughout 2008.
What the hell were they thinking over at Henry Paulson's Treasury Department Office of Thrift Supervision in 2008? Here's a little background from Wikipedia on the "OTS." It's like a Who's Who of failed banks!
...OTS is unique among the federal bank regulatory agencies in that it supervises holding companies as well as thrift institutions. This results in OTS providing consolidated supervision for such well-known firms as General Electric (GE), AIG, Inc., Ameriprise Financial, American Express, Morgan Stanley, and Merrill Lynch. OTS's consolidated supervision program for GE, AIG Inc., and Ameriprise has been recognized as "equivalent" by the European Union - allowing these firms to operate their financial businesses in the EU without forming an EU holding company and submitting to supervision in the EU.
--SNIP--
Institutions regulated by the OTS
The following are some of the larger institutions currently or formerly regulated by the OTS.
* American Express Bank, FSB - Salt Lake City, UT
* American International Group - New York City, NY
* Astoria Federal Savings and Loan Association - Long Island City, NY
* BankUnited, FSB - Coral Gables, FL
* Capital One, F.S.B. - McLean, VA (NOTE 1)
* Chevy Chase Bank, Federal Savings Bank - McLean, VA
* Citicorp Trust Bank, FSB - Wilmington, DE
* Citizens Bank of Pennsylvania - Philadelphia, PA
* Countrywide Bank, FSB - Alexandria, VA (NOTE 2 - now a part of Bank of America)
* Downey Savings, F.A.- Newport Beach, CA (now a part of US Bank)
* E-Trade Bank - Arlington, VA
* Flagstar Bank, FSB - Troy, MI
* Guaranty Bank - Austin, TX
* H&R Block Bank - Kansas City, MO
* Hudson City Savings Bank, FSB - Paramus, NJ
* IndyMac Bank, FSB - Pasadena, CA (NOTE 3)
* ING Bank, FSB - Wilmington, DE
* New York Community Bank - Flushing, NY
* Ohio Savings Bank / Amtrust - Cleveland, OH
* PFF Bank & Trust - Rancho Cucamonga, CA (NOTE 2 - now part of Cal National Bank, which is owned by FBOP Corporation)
* Sovereign Bank - Wyomissing, PA
* USAA Federal Savings Bank - San Antonio, TX
* Washington Mutual FSB - Seattle, WA (NOTE 2 - now a part of JPMorgan Chase)
* Wilmington Savings Fund Society, FSB - Wilmington, DE
Note: Diarist's emphasis is in bold, and only accounts for some of the failed/"forced-to-merge" banks on this list.
On the one hand, as former Federal Savings and Loan Insurance Corporation official William Black has noted in numerous interviews over the past couple of weeks, "Black's Indictments Gain Traction, Goldman CFO Pleads Ignorance," it shows us that the government will step in and put these entities into receivership, given the authorization to do that; but, on the other hand, as is self-evident from the unfolding scandal regarding their complicity in out-and-out bank fraud in 2008, it's just another reminder of what happens when an administration acts as if it's above the law.
From American Banker via The Miami Herald:
Banking inspector probed over BankUnited report
The U.S. Treasury's inspector general is examining whether the suspended acting head of the Office of Thrift Supervision allowed BankUnited to overstate its capital, according to sources.
BY CHEYENNE HOPKINS
American Banker
WASHINGTON -- When the government removed Scott Polakoff as the acting director of the Office of Thrift Supervision last week, it said he was being investigated for "August 2008 actions related to post-period capital contributions.''
The explanation wasn't exactly transparent, but sources say that Polakoff is being accused of allowing Coral Gables-based BankUnited to overstate its capital. Specifically, the charge is that the regulator let the $14 billion-asset thrift tell the public that it had raised capital before it had actually done so.
--SNIP--
In an Aug. 11 filing with the Securities and Exchange Commission, BankUnited said it received an $80 million capital infusion from its holding company, BankUnited Financial, during the quarter ended June 30. The investigation is looking into whether the investment was actually made later.
The article goes on to tell us that Polakoff 's departure followed "followed the December ouster of Darrel Dochow, director of the agency's west region, over allegations by the Treasury Department's inspector general that he allowed IndyMac Bank to overstate its capital. Regulators seized IndyMac in July."
And, apparently, "backdating" of capital infusions--essentially blatant violations of the law--were fully enabled under OTS regulatory watch on multiple occasions in 2008, most notably with IndyMac in May, 2008:
The inspector general alleged that Dochow allowed IndyMac to count a May 9 infusion of capital from its holding company toward its first-quarter capital ratio. The backdating allowed the $30 billion-asset thrift to stay above a 10% capital ratio threshold and avoid complying with a brokered deposit restriction that is automatically triggered when an institution is no longer considered ''well'' capitalized.
In January, then-OTS Director John Reich acknowledged in a letter to the Treasury that an internal review found four cases of unacceptable reporting of capital infusions, including IndyMac's. The letter didn't identify the other institutions, except to say they were in the OTS' northeast, southeast, and west regions.
Given these facts, we're not even getting into what was occurring with the manipulation of these respective firms' equities in their respective markets at the time; but, consider this: What would be your sentiments be if you knew of these goings-on at the same time you were buying stock in these firms back in 2008?
In light of what we know now, this would clearly indicate that fingers may be pointing soon at Treasury Secretary Paulson, roughly just one or two degrees of separation away from these actual misdeeds, especially since this is clearly amounting to a somewhat standardized practice throughout the OTS in 2008.
Perhaps an even more powerful reality here is that it's nothing less than proof-positive that fraud has been rampant, institutionalized and flat-out supported by our government throughout our nation's financial services sector for a very extended period of time. And, when fraud is clearly demonstrated, as any first-year securities law student will tell you, that means all bets are off. At that point (once fraud is clearly proven), all buyers of related securities maintain clear legal claim to 100% face-value restitution for same.
Meanwhile, as we're reminded by yet another major/pending bank failure this week--this time at Florida's BankUnited--round two of U.S. bank failures related to the mortgage meltdown (i.e.: the Alt-A and Option ARM reset phase) is just getting underway.