WASHINGTON, Nov. 23 (UPI) -- The U.S. Office of Thrift Supervision is being blamed for what critics say was lax oversight of Countrywide Financial Corp.
The agency regulates thrifts, also known as savings and loans, which focus on mortgage lending. It is funded through fees paid by the banks it regulates, and competes with other regulators to land the largest financial firms -- so when it got mortgage giant Countrywide the agency made a big score, The Washington Post reported Sunday.
The federal government has seized three of the largest institutions regulated by OTS -- including IndyMac Bancorp, Washington Mutual and Downey Savings and Loan Association.
Critics say the Office of Thrift Supervision had an aggressively deregulatory stance toward the mortgage lenders it regulated. The agency reportedly allowed the reserves the banks held as buffers to sink to historic lows.
Scott Polakoff, OTS senior deputy director, said the agency had closely monitored allowances for loan losses and considered them adequate.
"Are banks going to fail when events occur well beyond the confines of reasonable expectation or modeling? The answer is yes," Polakoff told the Post.