The White House’s move to appoint Joseph Otting as the Comptroller of the Currency in November underscores the changing relationship between the nation’s largest banks and the federal government. Otting is the first banker in decades to run the OCC.
According to a report in The Wall Street Journal, Otting’s appointment signals a change in how the federal government will regulate banks following the Great Recession, which saw an onslaught of new regulations geared toward financial institutions. The OCC oversees large banks, including Bank of America and U.S. Bancorp, which are former employers of Otting.
Since his appointment, Otting is reportedly urging a rewrite of anti-money laundering and community development programs, which are expensive to the banks. He is also encouraging banks to expand their business to include small-dollar loans, as well as loans to companies that already have a lot of debt.
“The tempo in the regulatory community is different,” Otting was quoted as saying during a securitization conference in March. “I think it is more of a partnership with the banks as opposed to a dictatorial perspective under the prior administration.” Otting is slated to testify before Congress this week for the first time since taking office, and will get a chance to provide more examples of his approach to regulating the nation’s largest banks.
While the banking industry welcomed Otting’s use of the word “partner” to describe the OCC and banks, other regulators have raised red flags about the comment, pointing out that the concept of self-regulation is what led to the financial crisis and bailout of big banks. During a speech last week, Ohio Senator Sherrod Brown, the top Democrat on the Senate Banking Committee, said in a speech that Otting and other White House-appointed regulators are giving in to the bank lobbyists to undo rules that were put in place to protect consumers.