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Incoming Regulator Promises No More Coddling of Banks

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The Office of the Comptroller of the Currency is so lenient on the banks it is supposed to regulate that it could be mistaken for a division of the United States Chamber of Commerce. Does its new head, Thomas J. Curry, have any hope of giving it a backbone?

Mr. Curry, a former director of the Federal Deposit Insurance Corporation, a regulator that actually regulates, has been leading the O.C.C. for about six weeks. He made his debut in Congress last week, expressing contrition over his agency's failure to monitor JPMorgan Chase's trading that resulted in multibillion-dollar losses for the bank.

In an interview, Mr. Curry showed hopeful signs of recognizing what's wrong with the agency.

"I hear there are concerns about the objectivity of the O.C.C.," he told me in his first public interview since taking the position. "It's not an issue of technical skills. It's really an issue of refocusing our mission and our sense of purpose and making sure we look at things with basically a healthy skepticism."

Sad to say, an emphasis on regulatory skepticism is what now passes for radical. But Mr. Curry has the right critique. The O.C.C. is smart enough, professional enough and sufficiently funded.

But the agency suffers from "mission confusion," as a former regulator at a rival agency told me. Indeed, if anything, the comptroller's office is too smart and too good at what it does. The heavyweight there, by all accounts, is Julie Williams, the agency's general counsel. She is savvy, aggressive, generally knows more about bank rules than anyone else in the room — and consistently pushes for less regulation, according to other regulators and Congressional workers with whom I have spoken.

(The O.C.C. did not make Ms. Williams available and Mr. Curry declined to comment on personnel matters.)

It's quite remarkable what the agency has managed to accomplish in the few short years since the financial crisis, when one might have thought that bank regulators would rethink how they approach their jobs.

Where to start?

The JPMorgan Chase losses have given new urgency to the Volcker Rule, which bars banks from making speculative bets with their money because they are backed by the taxpayer. The O.C.C. was last heard using a crowbar to open up huge exemptions in the Volcker Rule. The rule is being finalized, and it's not clear, even under Mr. Curry's leadership, that the agency has backed off from any of its stances. Mr. Curry declined to comment on current rule-making.

Gutting Volcker was in keeping with several of the O.C.C.'s positions after passage of Dodd-Frank, the main legislation to overhaul how the government regulates the financial system. John Walsh, who was the acting comptroller until this year, was a loyal and true friend of Big Banks. He was openly critical of the efforts to tighten regulation of the financial industry. He even fought with other bank regulators about how much additional capital the giant, systemically important banks would need to hold, supporting a paltry 1 percent, when other regulators were pushing for an additional cushion of 3 percent.

Before the crisis, the O.C.C. had often exercised its rights to "pre-emption," or cutting off state regulations before they were instituted. One could debate the merits here, but the regulator used its power to kill tough rules emerging from the states. Then Dodd-Frank sought to hinder that power. The O.C.C. openly defied it, coming out with a legal interpretation that said, well, we think we can do just as much pre-emption as ever.

That was too far even for F.O.B. (friend of banks) Treasury Secretary Timothy F. Geithner and his staff. The Treasury Department's general counsel fired off an unusual and sharp rebuke of the regulator, accusing the O.C.C. of trying to ignore the law. The agency backed down.

But wait, as with the Ginsu knife, there's more! Just last month, the Office of the Inspector General of the Treasury Department issued a report that criticized the O.C.C. over its failure to supervise its banks' foreclosure processes in the wake of the "robo-signing" scandal and myriad other problems with home loan modifications. As the foreclosure wave hit, the agency continued to insist that things were fine at the banks and moved sluggishly, when at all, to push for remedies.

All of this underscores the lost opportunity of the Dodd-Frank Act. The law did little to nothing to remedy the structural problems of our financial regulatory system. We got no reordering or streamlining. True, the worst bank regulator, the Office of Thrift Supervision, was shuttered. But in its place came multiple new agencies, offices and committees: the Consumer Financial Protection Bureau, the Office of Financial Research and the One Committee to Rule Them All, the Financial Stability Oversight Council.

What we didn't get enough of was attitude adjustment. Good regulation isn't made merely through money, staffing and legal power. It's made through will and commitment. Regulators have to believe in their mission.

Previously, O.C.C. regulators have emphasized that they want our banking system to be "safe and sound." To that, Mr. Curry has added the word "fair." A banking system needs to serve people and businesses, so that we don't simply have, as he says, "a safe and sound national bank system just for sake of the system itself."

"I'm committed to improving the agency's reputation," Mr. Curry told me.

The question is whether the host will reject the transplant.

It’s worth pointing out (perhaps to Mr. Curry) that the first time any of us had heard about the OCC was Eliot Spitzer’s February 2008 opinion piece, where he referred to their actions as “an aggressive and unprecedented campaign to prevent states from protecting their residents from the very problems to which the federal government was turning a blind eye” in 2003.  (Spitzer’s scandal, on which all charges were dropped for lack of evidence, coincidentally broke less than a month later.)

That’s the agency’s reputation.  Not “coddling” the banks, but acting as their defender by actively depriving states of their consumer protection laws and suing all fifty state Attorneys General to block them from investigating.  Coddling is generally considered being nice to someone, not kicking everybody else in the shins.

JP Morgan senior bank executives responsible for the $2 billion plus trading loss do not want any of their pay taken back to make for it. The executives just want the taxpayer to put it on their “tab” as usual.

wish I could be at all optimistic…but no and no…

witness Schneiderpuppet

“The heavyweight there, by all accounts, is Julie Williams, the agency’s general counsel. She is savvy, aggressive, generally knows more about bank rules than anyone else in the room — and consistently pushes for less regulation...”

Sounds like a member of those “conservatives” who worship Ayn Rand. 

You know, those nominal Americans who - like the “conservatives” on the Supreme Court - are intent upon defining the course of this nation with no regard or respect for the wishes of the American people or the safety and security - the long-term survival - of the United States of America?

I don’t think anyone whose goal set is restricted to that which gives those who already have wealth and power more wealth and power has any place in elected or appointed office in a democracy, for when you permit such a person to attain such an office the apparent rule is they will also operate with no regard or respect for the responsibilities and limits of their office or the role of government as outlined by the Constitution.

Also like the so-called “conservatives” on the Supreme Court.

OCC turned into a lion without teeth in 1982 as a result of fiscal policies of the bygone era. The sad part of our capitalist democracy is that public’s input into the process is neglected by lawmakers due to sheer influence of lobbysts that have infilterated every corner of our House of Represntatives!

To be clear, what are efforts to deregulate if not attempts to reduce the constraints on those who already have wealth and power? 

Are they not an attempt to give those who already have wealth and power more wealth and power by weakening/eliminating/not enforcing those regulations which prevent them from preying upon those who have less wealth and power?

Seems more and more like a monarchy than a democracy to me. I’m glad Mr. Curry got the job rather than Ms. Williams. How are those two going to get along, I wonder?

Nonsense.  As long as banksters give away billions to hijack one-person/one-vote, there is no public official that has any power to change anything. That is a fact that rises above the endless political rhetoric of change.

John: Re Spitzer: EXACTLY!! Hope Curry doesn’t have any skeletons in his closet.

If Curry really does start rattling cages, we can be sure the next tactic our bought off legislators will accomplish is to de-fund the OCC along with all other regulatory agencies which don’t conform to corporate designs - actions which will be hotly defended and justified through using the terms “fiscal responsibility” and “government intrusion into American lives” of course.

sorry i don’t believe you will regulate anying but your way to a corporate job.  i’ve lost all faith in our government and business and new leaders.

SymphonyMusic

June 13, 2012, 9:44 p.m.

The OCC grants “bank charters” that are issued based on a “public trust” that the bank will do well in every State in which it operates.  It should be the responsibility of each State Banking Commissioner to make sure that this is delivered.  “Doing well,” means that the bank has to work accretively with the residents and small businesses of each State to make sure that each State economy functions.  This function means making working capital loans available to small businesses in a State and making residential mortgages available at competitive rates.  It seems to me that the OCC and the state Banking Commissioners have failed in their duties to enforce.  The OCC banks have also not lived up to their obligation to deliver without needing to be supervised.

We have a mess.

I will believe the Curry cure when I see it.

Old Law books and the system need thorough overhauling and no one but good and less-greedy hamans only can make a difference.

Michael Fulks

June 14, 2012, 7:41 a.m.

So, no one even thinking about firing Julie Williams then?

@Michael Fulks:  Not having had the wisdom to cultivate my greed at the expense of my ethical system from an early age, I am not a member of the 0.01% our politicians bow to; in consequence, I am afraid that my opinion that an individual who is not a legislator or a member of the Administration should not be running around demanding that the law be changed to suit their personal ethos - that is, my opinion that the Constitution should be adhered to - carries no weight.

I’m just…an American…just one among the several hundred million Americans who are being forced to watch as the greed of those inside and outside of government destroys America.

I’d note that common sense should prevail.

History has far more anecdotes of soldiers, law enforcement officers, and even juries deciding to not enforce laws that they don’t support than it does of people choosing to comply with laws that impede their ability to get what they want when they know the regulatory or law enforcement officer(s) (or the regulatory agency’s general counsel) might at least be called as an eager witness in their defense - and the wishes of the electorate and its legislative bodies be damned.  Assuming those officers enforce the law, at all, of course..which is a bad assumption to make if they’re making their antipathy towards the law public knowledge.

If you want a law obeyed, you don’t want the authority figures responsible for enforcing that law running around ridiculing it.  But that, again, is common sense…and simply doesn’t have the weight of money.

Catherine Tripp

June 15, 2012, 1:04 p.m.

This part in particular, is well said:  << Good regulation isn’t made merely through money, staffing and legal power. It’s made through will and commitment. >>.  Fraud is already fraud, it doesn’t have to be re-defined, it just has to be prosecuted.

Viktor Stanslow

June 19, 2012, 10:35 a.m.

We need only to look at the example of Iceland to know how to deal with the Banksters.

Jesse Eisinger

About The Trade

In this column, co-published with New York Times' DealBook, I monitor the financial markets to hold companies, executives and government officials accountable for their actions. Tips? Praise? Contact me at .(JavaScript must be enabled to view this email address)