By MARCY GORDON, AP Business Writer Marcy Gordon, Ap Business Writer

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41 mins ago

WASHINGTON – The previous head of the federal thrift supervision office is leaving the government amid criticism of the agency’s role in the run-up to the financial crisis.

Scott Polakoff, who was placed on leave in March from his position as the Treasury Department’s Office of Thrift Supervision, is retiring on July 3, the agency announced Friday.

Polakoff, who was the agency’s chief operating officer and senior deputy director, held the acting-director position only since February following the resignation of OTS Director John Reich. John Bowman is now acting director.

The Obama administration’s new plan for overhauling financial regulation calls for abolishing the OTS. It oversaw insurance conglomerate American International Group Inc. — whose near-collapse last fall led to about $180 billion in federal aid.

The agency, which regulates about 800 federally insured savings institutions, has been vilified by lawmakers and consumer advocates for what they say was lax oversight of the thrift industry.

Two of the biggest bank failures in U.S. history occurred last year and involved thrifts. Pasadena, Calif.-based IndyMac Bank collapsed in July and cost the federal deposit insurance fund nearly $9 billion, and Seattle-based Washington Mutual Inc. was the largest U.S. bank failure ever. WaMu fell in September, with around $307 billion in assets. It was acquired by JPMorgan Chase & Co. for $1.9 billion in a deal brokered by the Federal Deposit Insurance Corp.

Because they are required by law to have at least 65 percent of their lending in consumer loans such as mortgages, thrifts have been especially vulnerable to the housing downturn.

Polakoff worked at the FDIC for 22 years before going to the thrift agency in November 2005. He has expressed interest “in transferring his skills to the private sector,” according to the OTS announcement.

“Scott has served the government with distinction over his career,” Bowman said in a statement. “We wish him the best in his next endeavor.”

Polakoff had been put on leave in March pending an investigation by Treasury’s inspector general into improper backdating of cash infusions at six savings and loans including IndyMac. OTS officials were aware of the backdating at two of the thrifts, and directed or authorized those institutions to do it, according to the inspector general’s report last month.

Pushing back the dates of the infusions can allow banks to meet quarterly government requirements for capital reserves held as a cushion against risk. The backdating of capital injections in 2007 and 2008 was “inappropriate” for all six thrifts, according to the inspector general’s report.

The report “paints the disturbing picture of a regulatory agency being much too cozy with the industry it’s supposed to be regulating,” Sen. Charles Grassley, R-Iowa, said at the time. “The agency needs to make sure this doesn’t happen again and hold the appropriate people accountable.”

In February, the OTS launched a new unit to monitor thrifts with more than $10 billion in assets, with plans to work onsite at about 25 institutions. The agency also said it was establishing new standards for reviewing actions taken on thrifts that don’t meet minimum standards.