Regulators Close Downey, Other Banks

Three more U.S. financial institutions failed Friday, bringing to 22 the number of banks and savings and loans that have collapsed this year.

The Office of Thrift Supervision closed Downey Savings & Loan held by Downey Financial Corp.(DSL Quote) of Newport Beach, Calif. late Friday, placing the long-troubled thrift into Federal Deposit Insurance Corp. receivership.

Regulators also shut down PFF Bank & Trust (held by PFF Bancorp(PFFB Quote) of Pomona, Calif., and The Community Bank of Loganville, Ga.

The FDIC sold all of Downey's deposits and nearly all of its assets to U.S. Bank, NA (the main subsidiary of U.S. Bancorp(USB Quote)).

In its press release announcing the closing of Downey and PFF Bank & Trust, the OTS said the failures demonstrated "the tremendous impact of the housing market distress on the state of California," and Director John Reich pointed out that all of the larger OTS-supervised institutions failing during 2008 "had major concentrations in housing finance in that state."

The OTS is the chief regulator of all federally chartered and many state-chartered thrift institutions, so it was responsible for overseeing companies like Downey throughout the real estate boom and bust. Other thrifts that failed under the OTS' supervision include Washington Mutual, IndyMac, Countrywide and the old option-ARM specialist Golden West (which almost destroyed its acquirer, Wachovia(WB Quote)).