The failure of the largest thrift in the nation has sealed the fate of the Office of Thrift Supervision, observers said Friday.

Washington Mutual Inc. accounted for about 20% of the assets overseen by the agency and 12% of its budget. Its collapse and subsequent sale to JPMorgan Chase & Co., which said it would not keep Wamu's thrift charter, heightens concerns about the OTS' viability and spurred staunch defenders to rethink its future.

"I don't know how anyone can't be questioning the viability of the OTS," said Lawrence Kaplan, a lawyer at Paul, Hastings, Janofsky & Walker LLP and a former OTS official.

Even Ellen Seidman, a former OTS director and longtime advocate of the agency's independence, said Wamu's collapse changes things.

"You can't just say the status quo is acceptable," she said, though she stopped short of supporting a regulatory merger. "Whereas my previous position on the subject was, you are not going to gain a whole lot by getting rid of one agency ... , I think there are more things to thin k about. The future of the OTS is firmly on the table now." . . . Full Story (subcription only)