Where were regulators when banks were failing?

Scott Polakoff, the officer who allowed the backdating, had been promoted to acting director of the OTS. Polakoff was removed from his job in March as the inspector general investigated this case. BankUnited failed on May 21, leading to a loss of $4.9 billion for the FDIC. BankUnited has since been taken over by a consortium of private equity and bank investors. Polakoff didn't return a call seeking comment.

John Bowman, acting director of the OTS, says capital transfers from a bank's holding company are appropriate, though he admitted that their timing went against accounting rules.

"The (capital backdating) had no impact on whether the particular institutions or series of institutions would fail," Bowman says. However, the regulator has since worked to ensure that the banks can book capital only if it comes in before the end of a specific period.

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