Thrifts did not engage in regulatory arbitrage, nor were they a cause of the financial crisis, the top U.S. thrift regulator said on Wednesday.

John Bowman, acting director of the Office of Thrift Supervision, speaking at the American Bankers Association meeting in Washington, defended the industry against criticism it shopped around for the best regulator.

I don't think thrifts were the cause of the crisis, Bowman said At least, they weren't the cause more so than anybody else.

The OTS, a unit of the Treasury Department, oversees the thrift industry, which provides financing for home buyers. It came under criticism for lax regulation in the recent economic crisis.

Financial reform proposals working their way through Congress call for merging the OTS into the Office of the Comptroller of the Currency as a way to streamline regulation of banks, which now can choose from several federal and state regulators.

Senator Christopher Dodd, chairman of the Senate Banking Committee, this week introduced long-awaited legislation to reform the financial system. The House passed its version of the reforms last year.

Dodd has failed to gain Republican backing for his plan thus far, and Bowman said he was loosing momentum.

The OTS had a budget surplus of about $25 million last year and Bowman estimated a deficit of nearly that this year.

But he said the agency had a healthy amount of reserves set aside, due in part to years of bank fees.

We believe we are a vibrant organization and will continue to be until someone signs a piece of paper, he said, citing the uncertain nature of the reform legislation.

Bowman, who sits on the board of the Federal Deposit Insurance Corp, also said there will be a long list of bank failures into 2011.

(Reporting by Kim Dixon; editing by John Wallace)