Wounded U.S. bank watchdog needs urgent care

Among the many U.S. financial regulators, the Office of the Comptroller of the Currency has been a bit of a renegade

  
A Wall St. sign is seen near the New York Stock Exchange (NYSE) in the financial district in New York, U.S., November 24, 2020.

A Wall St. sign is seen near the New York Stock Exchange (NYSE) in the financial district in New York, U.S., November 24, 2020.

REUTERS/Brendan McDermid

(The author is a Reuters Breakingviews columnist. The opinions expressed are her own.)

WASHINGTON  - A U.S. bank watchdog injured during the Donald Trump administration needs urgent care. The Office of the Comptroller of the Currency, which oversees giant lenders like JPMorgan, went astray in recent years. President Joe Biden will soon appoint a new leader for the OCC, and time is of the essence.

Among the many U.S. financial regulators, the OCC has been a bit of a renegade. Last May, it revamped rules evaluating the way banks serve poor and minority communities. Comptroller Joseph Otting decided to go ahead without the backing of the Federal Reserve and Federal Deposit Insurance Corporation, which also administer those rules, so banks faced potentially conflicting measures.

His successor made waves, too. In the last days of the Donald Trump administration, then-acting Comptroller Brian Brooks finalized a rule that banned banks with more than $100 billion in assets from refusing to lend to certain businesses, such as gun manufacturers or energy companies. The rule was rushed through, skirting the usual timetable and compressing the typical 60-day consultation period.

The OCC halted that action after Biden took office to allow the next comptroller to review it. But no one has been publicly named for that spot, meaning a new boss may not be in place for some time. Meanwhile, the Senate is holding a confirmation hearing on Tuesday for picks to lead the Securities and Exchange Commission and the Consumer Financial Protection Bureau.

In the meantime, transparency around enforcement actions has been inadequate. For example, last October the OCC slapped a $400 million fine on Citigroup for “deficiencies in enterprise-wide risk management” but did not provide any details on exactly what the bank had done.

The agency needs someone who can move quickly – not just to repair the damage, but also to be firing on all cylinders as regulators look at what rules are needed to deal with the next phase of the Covid-19 pandemic. The OCC ought to be at the center of those discussions.

Former Treasury official Michael Barr, who has experience formulating complex rules garnered after the financial crisis, is under consideration, according to people familiar with the situation. So is inequality-focused academic Mehrsa Baradaran. But nothing can happen until the White House officially nominates a pick. Until triage is applied, the OCC will continue to limp.

CONTEXT NEWS

- Former Treasury official Michael Barr is under consideration to lead the Office of the Comptroller of the Currency, according to people familiar with the matter.

- Barr is currently the dean of the Gerald R. Ford School of Public Policy at the University of Michigan. In the Barack Obama administration, he was assistant secretary for financial institutions at the Treasury Department and was involved in writing the Dodd-Frank Act, which passed in Congress in 2010.

- Another contender is Mehrsa Baradaran, a law professor at the University of California, Irvine. She focuses on inequality, financial inclusion and the racial wealth gap.

(The author is a Reuters Breakingviews columnist. The opinions expressed are her own.)

(Editing by John Foley and Amanda Gomez) ((gina.chon@thomsonreuters.com; Reuters Messaging: gina.chon.thomsonreuters.com@reuters.net))

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