Thrift Regulator Mum on Allegations : Banking: Judge says federal examiner blackmailed executives of Westminster’s Delta Savings Bank.

LOS ANGELES —  The nation’s top thrift regulator said Tuesday that he could not discuss a judge’s findings that a federal examiner blackmailed Delta Savings Bank executives into hiring her.

Timothy Ryan, director of the Office of Thrift Supervision, said the customary course of action in handling allegations of employee misconduct is to ask for the internal investigating arm of the U.S. Treasury Department to look into the claims.

Delta was a tiny, troubled Westminster thrift when four Korean immigrants bought it three years ago and revived it. Regulators, however, seized it in November even though it was healthy and met federal mandates for financial strength.

The Office of Thrift Supervision also accused directors and officers in an enforcement proceeding of violating banking laws and causing losses at the thrift. The agency sought to ban the executives from the industry for life and to obtain restitution for losses.

But in written findings released last week, Administrative Law Judge Arthur L. Shipe said the agency failed to prove its case against two former directors, including the thrift’s former president.

Moreover, Shipe found that an OTS examiner in charge of auditing Delta “advised” the savings and loan’s president that the company “would experience severe regulatory problems unless (she) was hired to keep the institution out of trouble with regulators.” The woman was hired as chief operating officer.

The Office of Thrift Supervision, which is part of the Treasury Department, also was accused in testimony last spring before Shipe of actions that appeared racist against the Korean immigrants who bought Delta. One examiner “chewed out” the thrift’s president and then called his superiors to brag that he was “banging up on the Korean,” according to testimony.

As director of the federal agency, Ryan must review Shipe’s findings and any objections filed by lawyers for the OTS and for the directors. Lawyers have a month to file objections and 20 more days to reply to each other’s objections. Ryan then has 90 days to approve, modify or reject the judge’s findings.

Ryan has never rejected a judge’s findings previously, but the Delta case is only the second enforcement action that the agency has lost. Ryan is still reviewing the first, which involved Newport News Savings Bank in Virginia.

Ryan’s response to Shipe’s findings came in a press briefing after he and three other of the nation’s top banking regulators held a public hearing at the Stouffer Concourse Hotel on complaints that the region’s economic recovery is being stifled by tight lending.

A number of comments from builders, bankers and others criticized overregulation of the banking industry and the apparent vindictiveness of federal banking examiners in carrying out their duties. Ryan denied that there were anything but isolated cases of some employees being “off the reservation.”