Center for Responsible Lending Says OTS Has Failed

The Office of Thrift Supervision failed to curb the risky lending activities of IndyMac Bank and Washington Mutual that led to the giant thrifts' demise, according to a new report by the Center for Responsible Lending. "OTS has failed in its primary mission" and it should be eliminated as a free-standing agency, CRL says in a report entitled the "Second S&L Crisis." The federal thrift regulator allowed WaMu, IndyMac and other thrifts to "engage in increasingly risky lending practices that harmed borrowers, undermined the institutions' own financial health and ran up enormous costs that have landed in the taxpayer's lap," the report says. In addition, the OTS "hid" the seriousness of the thrifts' financial condition from investors and the public. "OTS was created in 1989 to clean up that era's S&L mess," co-author Michael Hudson said. "Now the agency is presiding over the second S&L scandal -- one that couldn't have happened without the inaction and negligence by the very agency responsible for policing the industry." OTS declined to comment.