Feds Ignored Loan Problems at Failing IndyMac, Treasury Report Says
The federal Office of Thrift Supervision ignored inflated appraisals and lax lending standards that led to the failure of California-based IndyMac Bancorp, according to a report by the U.S. Treasury Department’s inspector general.
And that failure cost the taxpayer-funded Federal Deposit Insurance Corp. $10.7 billion, writes the Los Angeles Times.
OTS should have acted two years before the FDIC took over the bank in July 2008, and had it done so the failure might have been averted, the report says.
Focusing on short-term profits from making loans, the bank didn’t adequately look out for the long-term interests of those to whom borrowers were responsible for repaying, says assistant inspector general Marla Freedman. In one case, she recounts, the bank got multiple appraisals ranging from$500,000 to $5 million for the same property.
“Which one do you think IndyMac went with?” she asks rhetorically. “They always went with the high appraisal because their goal was to get these loans done and make a profit.”
