U.S. thrift regulator shifts California oversight to Texas

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The nation’s savings and loan regulator gave a pink slip to its Western regional headquarters this week: The Office of Thrift Supervision said it would shift oversight duties of its San Francisco office to a new regional headquarters in Dallas.

The demise of the Western branch’s authority is an acknowledgment that so many big S&Ls have failed under the office’s supervision, its existence no longer could be justified.

The announcement comes less than a month after the retirements of OTS Director John Reich and former West Region chief Darrel Dochow. The latter left amid allegations he had allowed IndyMac Bancorp to illegally backdate a cash infusion that hid from depositors and investors the true extent of the company’s troubles last spring.

Pasadena-based IndyMac was just one of a string of major institutions that crumbled under the watch of OTS West. A quick recap:

-- March 2007: The Federal Deposit Insurance Corp. orders Fremont Investment & Loan in Brea to stop making subprime loans. The thrift is forced over the next year to sell off its units piecemeal.

-- January 2008: Countrywide Financial Corp. of Calabasas agrees to sell out to Bank of America Corp. after struggling to stay afloat as losses on risky mortgages pile up.

-- July 2008: Six months after the OTS started a review of IndyMac Bank, federal regulators declare it insolvent and seize it.

-- September 2008: The FDIC seizes Washington Mutual of Seattle and sells it to JPMorgan Chase & Co.

-- November 2008: The FDIC takes over two Southern California thrifts -- Newport Beach-based Downey Savings, one of the largest originators of ‘option ARM’ loans that allowed borrowers to choose their own payment plans; and PFF Bank & Trust in Pomona, which specialized in home loans and loans to builders. The thrifts are sold to U.S. Bancorp in Minneapolis.

-- January 2009: First Federal Bank in Los Angeles enters into a cease-and-desist order with regulators that gives them strict oversight of the thrift’s operations. A few days later FirstFed reports a $245-million fourth-quarter loss.

The OTS was gentle in its news release on the phase-out of the San Francisco office’s authority: It simply cited ‘a change in the number and size of institutions supervised’ by the office.

-- William Heisel