Monday, May 18, 2009

Treasury's OTS Disses Federal Reserve Policy

The Office of Thrift Supervision (OTS), an agency within the Treasury, is opening a door the Federal Reserve has kept shut. OTS is allowing a leveraged buyout firm to take control of a bank.

OTS has approved MatlinPatterson Global Advisers LLC’s purchase of Flagstar Bancorp Inc. in Troy, Michigan, and may allow similar takeovers.

The Fed has told private-equity companies it won’t permit a firm that isn’t regulated as a bank to own a majority stake in a bank. Thus, blocking private equity from acquiring banks in the manner the OTS has just allowed MatlinPatterson to buy Flagstar Bancorp.

The Fed oversees national banks chartered by the government. The OTS is an office of the Department of Treasury that regulatesd 818 thrift institutions, including savings and loans and credit unions.

Given that Treasury Secretary Geithner appears to be close to the overhaul in regulation that the Obama Administration will soon announce, the OTS move may be a signal that private equity is about to be given the green light to move into a full-fledged accumulation mode of financial entities, with the Federal Reserve's policy being sideline and Fed Chairman Bernanke being left with little to do outside of printing huge gobs of money and keeping his beard well groomed.

(Special shout out to PEU Report who in the comments first brought to my attention the OTS move.)


  1. Geithner just dodged Senator Jack Reed's question on Treasury's policy change.

    Timmy is slippery!

  2. Given the OTS' direct roll in allowing IndyMac and 5 (known) other banks to backdate capital contributions to give the appearance of healthiness in early 2008, this isn't surprising.