Last week, the inspector general of the U.S. Department of the Treasury issued an 80-page report examining regulatory failures surrounding the IndyMac failure. Newsom said he hadn't spoken with federal investigators, although the report echoed many of his concerns. "I wrote that this is what you'd have expected to find, given the data that was available last July," he said. "It had to be that way, and it was. In any case, it was really nice to have them follow my road map."
The Treasury report chastised the OTS, just as Newsom had, for failing to identify and regulate IndyMac's strategy of growth via massive, irresponsible lending. It exonerated Schumer from OTS officials' charge that he caused IndyMac's demise. "The thrift was already on course to a probable failure by the time Senator Schumer's letter was made public," the report said.
Jake Poehls
Newsom on the beach near his home in Montara.
Banking regulator Darrel Dochow.
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As Newsom had, the report described the OTS West Region office under Dochow as a regulator asleep at the wheel. "IndyMac engaged in very high-risk activities over many years, yet OTS managers did not downgrade the thrift," it read. "IndyMac did not even appear on OTS's problem thrift list provided to our office, including the June 2008 list provided to us less than a month before the thrift was closed."
According to the report, Dochow believed that IndyMac's CEO, Michael Perry, had recruited investors to inject $1 billion into the bank. When investigators contacted the supposed investor, however, it turned out there was never any serious interest.
The combined disgrace was apparently too much for Dochow. In mid-February — a week before the release of the inspector general's report — he e-mailed staff announcing he would retire this month. "I must admit that being singled out for a series of highly personal attacks after the failure of a prominent thrift has been painful, but I have been humbled by the tremendous support and words of encouragement by many people who truly know me and the job that I have done over the years," Dochow wrote. (He did not respond to requests for comment from SF Weekly to discuss his involvement in IndyMac.)
Dochow also noted he'd be receiving 35 percent of his government pay as a pension, and that he intended to seek out "other opportunities" after he'd got some things done around the house.
Reich, the OTS director who'd attempted to pin the IndyMac debacle on Schumer, also announced his resignation. In a February 25 letter to the inspector general, he wrote that the OTS had "taken aggressive action to address the identified issues. The agency is committed to improve and strengthen its processes based on lessons learned from the failure of IndyMac."
Effectively reregulating the banking industry will require figuring out what went wrong. Newsom says it won't be easy, but it needs to be done. "Examining the Lincoln S&L was like looking up the asshole of government," he says. "Frankly, my investigation into the government's role in the collapse of IndyMac gives me the same queasy, greasy, up-to-the-eyeballs-in-doodoo feel. U.S. treasury officials helped in a de facto swindle of uninsured depositors." It was "an encore to Lincoln Savings and Loan."
