U.S. bank regulators directed capital backdating

By Karey Wutkowski and John Poirier

WASHINGTON (Reuters) - High-level bank regulators were aware that thrifts were inappropriately backdating capital contributions, allowing the lenders to appear healthier, and in one case they directed a thrift to engage in the practice, according to a report by a U.S. government watchdog.

The report by the Office of Inspector General said it was "alarming" that high-level officials at the Office of Thrift Supervision had approved or directed the backdating of capital at six thrifts, including failed lender IndyMac Bank.

Allegations of capital backdating have tarnished the reputation of the agency, a division of Treasury that largely regulates mortgage lenders.

In March, the inspector general placed acting OTS Director Scott Polakoff on leave pending a review of allegations of capital backdating in 2008. The report released on Thursday did not indicate the progress of that review.

The backdating allowed IndyMac to maintain its "well capitalized" status and avoid a requirement that could have made it harder for it to keep taking risky brokered deposits -- a big source of funding for some banks, the report said.

"We consider these matters very serious and find it alarming that such high-level OTS officials were not only aware of the backdating at two thrifts, but either directed or authorized the thrifts to backdate the capital contribution," the report said.

The OTS senior deputy director directed the backdating of capital at a thrift in the agency's Southeast region, but not IndyMac, it said.

Polakoff was senior deputy director before becoming the OTS acting director in February.