WASHINGTON — The Federal Deposit Insurance Corp.'s oversight of Franklin Bank in Houston was "not always timely and effective" before its November failure, the agency's chief watchdog said Tuesday.

The agency's inspector general cited risky lending in the demise of the $4.9 billion state thrift, and said the FDIC performed timely exams. But Franklin maintained a Camels rating of 2 until October 2007, despite FDIC recommendations starting in 2003 that it track loan concentrations, rein in liquidity risk and enhance auditing, the IG said.

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