I'll call it what it is, instead of playing word-games.

This is fraud.

Period.

"Misleading" financial reports?  That's fraud.

"Back-dating of capital"?  That's fraud.

And the OTS did more than just look the other way - this government agency is accused of directly conspiring to defraud depositors, shareholders and taxpayers:

Oversight failures were “very serious” and included a senior deputy director in August instructing a lender to backdate and a regional director authorizing revised accounting, according to the report today. OTS left unchanged revisions at three unidentified thrifts. Republican Senator Charles Grassley said the actions were “completely unacceptable” and a congressional subcommittee planned an investigation.

It’s “alarming that such high-level OTS officials were not only aware” of two revisions in capital reports, but “directed or authorized” the backdating, Susan Barron, audit director in the Office of Inspector General, said in the report that didn’t identify five of the six lenders. IndyMac’s August revision on capital helped the lender avoid OTS restrictions.

And, I might add, those scams cost the taxpayer essentially the entire contents of the FDIC's insurance fund.

That's right - the FDIC has no money.

Now I'm quite sure Congress will pony up more - of your and my money - to cover up the fraud rather than effort clawing back the assets of every single person involved both in the OTS and the banks that were participants in these schemes.

Oh, and OTS' response?

“The agency is committed to continuing to improve and strengthen its processes based on lessons learned from its internal review and the Office of Inspector General,” Acting Director John Bowman wrote May 18 to the inspector general. OTS gave “detailed guidance and communication” to employees and lenders regarding “proper recognition and reporting of capital contributions.”

How about indictments and prosecutions instead?

I have repeatedly said that this scandal is 100 times worse than Watergate, which was about political intrigue and burglary - not to steal money, but political secrets.

This is about stealing hundreds of billions of dollars from you, me, your children, grandchildren, and those not yet born, then covering it all up instead of locking up those responsible and clawing back every nickel of the guilt's assets.

Disclosure: Short the FDIC and OTS, long boiled rope.