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Incoming Regulator Promises No More Coddling of Banks

In his first interview, new O.C.C. head John Curry shows he knows what's wrong with the agency. But can he fix it?

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.

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