For a brief moment in time, the person tasked with overseeing policy supervision of U.S. banks was the husband of a high-level executive at one of those same institutions.
The Office of Comptroller Currency appointed David Wilson as its deputy comptroller for credit risk last year, American Banker reports. Wilson, the husband of a high-level Bank of America executive, recused himself from decisions that directly involved the bank. Concerned about the perception of a conflict of interest, the OCC reassigned him about four months later, but it wasn’t enough for critics who say the incident is indicative of the OCC’s cozy relationship with those it oversees.
In the wake of the financial crisis, many have derided policymakers and regulators alike for what they as an unhealthy Wall Street influence in Washington. Wall Street has poured large amounts of money into lobbying to weaken financial reform legislation over the past few years. More recently, the Federal Reserve Bank of New York, another bank regulator, came under fire for having JPMorgan CEO Jamie Dimon on its board, with even Treasury Secretary Timothy Geithner admitting Federal Reserve banks have a perception problem.
To make matters worse, the OCC news comes on the heels of criticism that the agency didn't adequately monitor JPMorgan Chase’s risk-taking ahead of the bank’s recent trading loss. Sherrod Brown, a Democratic Senator from Ohio, sent OCC head Thomas Curry a letter last week asking for more information about the agency’s monitoring of JPMorgan’s trading operations, the Wall Street Journal reports. In addition, the letter asks for details about the agency's process for reviewing trading operations at big banks.
And though the OCC had 70 staffers embedded at JPMorgan, none of them were stationed in the chief investment office -- the unit responsible for the huge loss -- even as it ballooned in size and made increasingly risky bets in the lead up to the debacle, The New York Times reports. The incident raises questions over how much influence JPMorgan’s CEO Jamie Dimon had over the agency’s decision.
The OCC is also under fire for failing to catch one of the biggest culprits in the housing crisis. According to a report from the Treasury Department Inspector General, the OCC missed the “robo-signing” scandal that took place between 2008 and 2010 in which banks systematically signed off on foreclosures without adequately verifying documentation.
The nation’s five largest banks reached a $25 billion settlement in February with 49 states and the federal government over robo-signing and other allegations of mishandled foreclosures.