IndyMac Scandal

Hello Folks!

I wanted to share an article with you today. The cesspool that we like to call our banking system is out of control. This type of fraud must be stopped or we will start we are going to start seeing a run on the bank:

"Maybe Others
Darrel Dochow May Not Be the Only Official Who Helped Banks Hide Financial Problems

A brewing fraud scandal at the Treasury Department may be worse than officials originally thought.

Investigators probing how Treasury regulators allowed a bank to falsify financial records hiding its ill health have found at least three other instances of similar apparent fraud, sources tell ABC News.

In at least one instance, investigators say, banking regulators actually approached the bank with the suggestion of falsifying deposit dates to satisfy banking rules -- even if it disguised the bank's health to the public.

Treasury Department Inspector General Eric Thorson announced in November his office would probe how a Savings and Loan overseer allowed the IndyMac bank to essentially cook its books, making it appear in government filings that the bank had more deposits than it really did. But Thorson's aides now say IndyMac wasn't the only institution to get such cozy assistance from the official who should have been the cop on the beat.

The federal government took over IndyMac in July, after the bank's stock price plummeted to just pennies a share when it was revealed the bank had financial troubles due to defaulted mortgages and subprime loans, costing taxpayers over $9 billion.

Darrel Dochow, the West Coast regional director at the Office of Thrift Supervision who allowed IndyMac to backdate its deposits, has been removed from his position but he remains on the government payroll while the Inspector General's Office investigates the allegations against him. Investigators say Dochow, who reportedly earns $230,000 a year, allowed IndyMac to register an $18 million capital injection it received in May in a report describing the bank's financial condition in the end of March.

"They [IndyMac] were able to maintain their well-capitalized threshold and continue to use broker deposits to make loans," said Marla Freedman, an assistant Inspector General at Treasury. "Basically, while the institution was having financial difficulty, it kept the public from knowing earlier than it otherwise should have or would have."

Quick Take:

When will everyone realize that our banking system is a total sham? Bof A's Lewis should be canned after this week. Only one month ago he claimed that Bank of America didn't need any of the TARP funds. He was forced to take the funds, and yesterday it was revealed that this crook needed to come back for another $20 billion from the TARP II last night.

This is a complete joke. The fact that folks from the Treasury are possibly involved in creating this "smoke and mirror" sham is even more frightening. They are supposed to be the cops! If we can't trust them then who can we trust? The guy above in the Indy Mac article should not only be fired, he needs to then go straight to prison!

How long are the citizens of this country going to put up with this banking debacle before saying "enough is enough" and pulling their money out? Moral hazard Hankie! Keep pushing it there buddy. One day this is all going to come home to roost.

Bottom Line:

Time is running out. The bank stocks continued to drop like a rock even after getting bailed out once again this week. We can't even get a one day "bailout" rally anymore! The reason for this is investors are realizing that the systems a fraud.

Transparency and trust must be restored immediately before our banks are destroyed. I stayed short on the financials over the weekend. In fact, I shorted the XLF today. I don't see a reversal here until everything gets cleaned up. If the financials couldn't rally today from severely oversold conditions on a day when when the rest of the market was up than when can they rally?

I think the jig is up here folks. I may be a tad early, but something drastic must be done before anyone buys and holds a financial stock long term again. This will result in lower stock prices.