In the whodunit of the financial crisis, Wall Street executives have pointed the blame at all kinds of parties — consumers who lied on their mortgage applications, investors who demanded access to risky mortgage bonds, and policy makers who kept interest rates low and failed to predict a housing market collapse.
But a new defence has been mounted by a bank executive: my regulator told me to do it. This unusual rationale is presented by the bank executive in one of the few fraud suits brought against a mortgage banking official in the aftermath of the financial crisis — the one filed by the Securities and Exchange Commission against Michael W Perry, former CEO of IndyMac Bancorp, which failed spectacularly in mid-2008.
After being accused of fraud and misleading investors about his company’s financial health just before it collapsed, Perry set up a Web site this fall to defend himself.
In a document on the site, he said that a top official at the federal Office of Thrift Supervision, IndyMac’s overseer, directed and approved an action related to the SEC’s allegations.
He said Darrel W Dochow, a financial regulator for more than 30 years, had “specifically directed” Perry to backdate IndyMac’s report to regulators to include an $18 million cash infusion that would make it look well capitalised.
The IndyMac collapse highlights the role played by federal overseers of financial companies in the years leading up to the crisis. It also raises questions about whether government officials should be held accountable for the failure of an institution and whether the government has avoided pursuing cases because of roles regulators have played.