The Office of Thrift Supervision

As is the case with other US federal bank regulators, the OTS is paid by the banks it regulates. Similar regulatory agencies include the Federal Deposit Insurance Corporation (FDIC) the Federal Reserve System, the Office of the Comptroller of the Currency (OCC) and the National Credit Union Administration. History reveals that, although the OTS started out adhering to stringent regulations, shutting down hundreds of troubled S&L agencies, it later became lax. To increase declining revenues, caused in part by the reduced number of operating S&L agencies, and to counteract competition, the OTS began to market itself to companies as a regulator that was somewhat flexible. One marketing campaign reportedly featured a garden shears poised to cut through a stack of federal regulations – and everyone got the message. It also expanded its scope to include companies that were not banks, and when the financial crisis of 2007-2010 manifested itself, some of the OTS regulated companies that failed included American International Group (AIG), IndyMac, and Washington Mutual.

Although the Office of Thrift Supervision continues to function in its regulatory role, calls for reform which started in 2008 with Treasury Secretary Henry Paulson proposing a merger with the OCC, continued with President Obama announcing on June 17, 2009 that he would ask the US Congress to merge the OTS with the OCC, and this was later reinforced by House and Senate proposals along the same lines. As the primary regulator of federal savings associations, or federal thrifts, the days of the OTS may be numbered – but only time will tell if that the proposals will be carried through.