The cost of IndyMac's failure to the FDIC's deposit fund is estimated to be about $10.7 billion. The audit focuses on the failures of supervision of IndyMac's primary regulator, the Office of Thrift Supervision. As we reported earlier, the OTS continued to give strong ratings to the bank despite lax lending standards and inflated appraisal. The audit reads like a case study in what happens when a regulator becomes too close to the institution it regulates. "OTS viewed growth and profitability as evidence that IndyMac management was capable," it concludes.