If today’s post by Kevin LaCroix at The D&O Diary is right, then Gretchen Morgenson is wrong about the FDIC’s settlement with former Washington Mutual executives. So are Senator Carl Levin (quoted in the column as calling the settlement “pretty soft”) and all the outraged readers leaving hang-‘em-high comments on sites like The Wall Street Journal’s. Not to mention yours truly.

In her Sunday New York Times column, Morgenson calls the FDIC’s settlement with three former Washington Mutual a “wrist slap.” My first reactions were “yeah, what else is new?” and “wonder where she got that wording from?”

But I didn’t challenge the underlying assumption that the goal of the FDIC’s lawsuit was to mete out punishment, and that thus the $65 million settlement amount was insufficient in that regard. At least, not until I read LaCroix, whose day job is working as an attorney for a firm that brokers director’s and officer’s liability insurance.  

According to LaCroix, the FDIC’s job in this instance is simply to recover as much taxpayer money as possible from a bank failure, not to right the scales of justice.  

“The FDIC’s action, in its role as WaMu’s receiver, was never intended as a means to administer punishment,” he writes. “Receivership actions are simply salvage operations, intended to try to reduce (or rather, offset) the failed bank’s losses. Whether punishment is to be sought is the business of other agencies and regulators,” to whom the FDIC sometimes refers cases, LaCroix says.

To be fair to Morgenson, her column did note that there were practical reasons for the FDIC to accept the amount it did. For example, the longer it took to settle, the less money would be available from the D&O policy.

She also quotes Levin as saying that the OCC, as the successor to the OTS (which regulated Wamu, at least in theory), could still go after the failed thrift’s former managers. Morgenson doubts it, given the OCC’s history.

But to LaCroix, it would be fairer to criticize the OCC for inaction than to blame the FDIC for failing to send a message to corporate America. The mission here, in other words, was financial, not moral.