WASHINGTON--A key senator on Monday questioned regulators' approval of a backdated cash infusion for IndyMac, a big thrift that failed in July and cost the federal insurance fund for banks nearly $9 billion.

The official at the Office of Thrift Supervision who approved the action has been reassigned within the Treasury Department agency that oversees savings and loans.

Sen. Charles Grassley of Iowa, the senior Republican on the Senate Finance Committee, said the "backdating" to March 31 of the $18 million capital injection into IndyMac by its parent company was done in May so the bank could meet first-quarter government requirements for reserves held against possible losses.

Its approval by the Office of Thrift Supervision raises concerns about the agency's role as an overseer, Grassley said in a statement.

And the regulators' action in the case of IndyMac Bancorp Inc. wasn't an isolated incident for the thrift agency, the Treasury's inspector general told Grassley in a letter the senator made public.

In looking into the IndyMac situation, "we also discovered that OTS had allowed other thrifts to record capital contributions in an earlier period than received," Treasury Department Inspector General Eric Thorson wrote. "While there is some support ... for recording capital contributions in one period that were received in a later period, that support is limited."

Citing that disclosure, Grassley asked, "What does that mean about the real financial condition of other banks? The role of the Office of Thrift Supervision, as the name says, is to supervise these banks, not conspire with them."

In a letter to Thorson, OTS Director John Reich said he had removed Darrel Dochow, the agency official in charge of the Western region, from that position and assigned him to handle special projects and administrative issues. Dochow will remain in the new assignment until results are in from a related inquiry being conducted by Thorson.

Several Democratic lawmakers and consumer advocates have criticized the thrift agency in recent years for what they said was lax oversight of the industry.

Dochow was the top supervisory official at the agency in the late 1980s, during the savings and loan crisis. He was demoted in March 1990 and transferred to the OTS office in Indianapolis, but later rose through the agency again to become the head of the Western region -- where numerous large thrifts were located.

Pasadena, Calif.-based IndyMac relied heavily on brokered deposits, sold by securities firms to customers outside of a bank's local area, which can carry higher interest rates but also can be riskier than traditional deposit accounts because they may not fall within the federal insurance limit.

By approving the capital injection for IndyMac dated to March 31, the regulators enabled the thrift to maintain its "well capitalized" rating and avoid the requirement to obtain a waiver from the Federal Deposit Insurance Corp. to accept brokered deposits, Thorson said in his letter.

IndyMac had about $32 billion in assets when it was seized by the FDIC in July. Renamed IndyMac Federal Bank, its failure cost the federal bank insurance fund an estimated $8.9 billion. It was the second-largest bank to fail this year, which has seen the collapse of 25 federally insured financial institutions amid the tumult of the mortgage crisis and the recession.

Seattle-based thrift Washington Mutual Inc. in September became the biggest bank to collapse in U.S. history, with around $307 billion in assets. It was acquired by JPMorgan Chase & Co. for $1.9 billion.

Reich also said he had asked that all members of the OTS staff involved in bank examinations be reminded "of the proper regulatory and accounting reporting expectations" related to capital injections.

While the agency believes the $18 million injection was "a relatively small factor in the events leading to the failure of IndyMac, we also recognize that we must take certain actions to ensure that OTS remains a well managed regulatory agency," Reich wrote.

Agency spokesman William Ruberry declined to comment Monday beyond Reich's letter.