The Center of A Viper's Nest Indeed Contains A Serpent

While the Madoff case rages on, another case involving bank regulation is developing, this time a federal regulator has been removed from his job for pulling the strings behind IndyMac Bank.

The Office of Thrift Supervision has removed its west region director as a result of an inspector general's investigation into the collapse of IndyMac earlier this year, according to correspondence made public today by Sen. Charles Grassley (R-IA).

Darrel Dochow was fingered by the OTS inspector general as having approved a backdated capital infusion of $18 million into IndyMac by its holding company to stave off a downgrade in the rating assigned to the bank. A downgrading in its level of capitalization would have triggered additional regulatory restrictions on IndyMac, according to a letter to Grassley from OTS Inspector Eric M. Thorson.

This isn't the first time Dochow has been the regulator involved in a major banking collapse. A generation ago he resisted calls to shut down Charles Keating's Lincoln Savings and Loan before its collapse, which became notorious thanks to the Keating Five scandal.

Dochow's approval for the backdating came in early May and was intended to buttress the bank's capital position as of the end of the first quarter, March 31. The plan -- some details of which, Thorson concedes, remain unclear -- was discovered by the inspector general for the FDIC in documents held by IndyMac's auditor, Ernst and Young, and were turned over to Thorson's office.

So a former Keating Five figure was covering for a bank to the tune of $18 million instead of regulating it. Gee, that's not SOP for the Bushies. And the best part? There's even more of these back-dated capital infusions floating around still being investigated.

Thorson's investigation, which is ongoing, found that OTS allowed other thrifts to similarly backdate capital infusions, but the letter provides no additional details about those other cases.

If you've done something bad enough in the Bush administration in order to actually lose your job, then you're in serious trouble.