Posts filed under “Regulation”

Sheila Bair vs. John Dugan

“The overwhelming share of increased actual and projected costs for the fund have been caused by actual and projected failures of smaller banks, not larger ones.”

-John Dugan, the comptroller of the currency


I don’t usually insert myself into personal disputes amongst regulators, but when one of them appears to be a bit of an asshat, I feel compelled to comment.

The spat in question is between Sheila Bair, the exemplary FDIC chairwoman, and the asshat being the speaker of the above WTF quote, John C. Dugan, the comptroller of the currency. I don’t know much about Dugan, other than some of the odd and indefendable statements he keeps making. He often misstates facts about the credit collapse, blames the wrong organizations for the subprime debacle, and otherwise seems to be a mouthpiece for the largest, most inept banking istitutions.

Some Dugan comments:

• “The overwhelming share of increased actual and projected costs for the fund have been caused by actual and projected failures of smaller banks, not larger ones.”

• The financial crisis stemmed in part from problems at small banks;

• Stiff new insurance fees on banks as unfair to the largest banks

• The responsibility for validating risk management models lies first and foremost with the institution itself. (OCC)


Part of the problem lies with the OCC itself. Its an agency that has been committed to radical deregulation. When the NY Attorney General was looking into “discriminatory mortgage lending practices,” OCC filed suit to stop the NYAG from inspecting the lending records of national banks using state laws.

The OCC decision to allow banks to become commercial real estate developers failed to recognize the inherent risk involved. Even the NAR complained. A 2002 ruling by the regulatory agency prevented Credit Card insurance from being regulated by the appropriate state agencies. And why anyone at the OCC thought allowing national banks to underwrite insurance was a good idea is hard to fathom.

At just about every turn, the OCC has ruled in favor of radical deregulation, and against consumers. Why the Obama administration has retained Dugan (he’s been at the OCC since 2005) is beyond my comprehension. He is a classic Bush appointee — a regulator who is against regulating — who should have been dismissed at the earliest opportunity.

Banks are in the business of taking in deposits and then lending that money out again. If they cannot do that responsibly and profitably, then they should get out of the banking business and into real estate development or insurance underwriting. But so long as the FDIC is on the hook as the insurer of these deposit accounts, banks should not be allowed to stray from their core competency into other businesses.

Stick with banking.


My Experience at Indy Mac: Fraud, Corruption, Criminality (July 2008)

Office of Thrift Supervision: Asshat Central (December 24th, 2008)

Video: IndyMac CEO Interview on CNBC (September 2006)

Idiots Fiddle While Rome Burns (July 2008)

Regulators Feud as Banking System Overhauled
NYT, June 13, 2009

OCC and Model Validation Part 2
Angry Bear, March 28, 2008

The Big Banks’ Best Friend in Washington
Steven Pearlstein
Washington Post, May 27, 2009

Category: Bailouts, Credit, Politics, Regulation

Re-Regulating the Financial Markets

National Economic Council Director Lawrence Summers laid out five principles for re-regulating the financial markets: 1. The government must have the authority to take over and liquidate failing nonbanking financial institutions. 2. Regulators must be able to make certain that financial institutions have enough capital to weather crises. 3. Regulated entities must not be able…Read More

Category: Bailouts, Regulation

TARP Repayment vs Re-Regulation

Be sure to read Jack McHugh’s comments on the TARP repayment. He specifically asks: 1. With all the chatter about responsible regulatory reform, shouldn’t the rules governing bank conduct (e.g. leverage ratios, off balance sheet vehicles, etc.) be put in place before TARP repayments flow in? 2. Before TARP preferreds can be redeemed, shouldn’t the…Read More

Category: Bailouts, Credit, Regulation

How Congress Betrayed Investors to Help Banks

This morning’s outrage comes to us via the WSJ, and it discusses how our elected representatives rolled over for their overlords, the bankers, in grateful genuflection to their largesse: Huge heaps of lobbying monies: “Not long after the bottom fell out of the market for mortgage securities last fall, a group of financial firms took…Read More

Category: Bailouts, Credit, Politics, Regulation, Valuation

Too Few Banks, Too Many Giants

I have repeatedly mentioned Too Big To Succeed as a cause of the most recent crisis, but have you ever wondered HOW we got that way? One obvious suspect has been the easy M&A environment of the past 20 years. Instead of a very competitive market where mergers for sheer size sake is discouraged, the…Read More

Category: Bailouts, Credit, M&A, Regulation

Financial Overhaul Plan ?

Yesterday, I lamented that “So far, the Obama administration approach to bailouts has been to keep running Bush Economic Term III.” The reference was to the continuation of the Bush policies, by many of the same people involved in that prior, ruinous bailout approach. Soon, we shall find out if Team Obama’s “Change we can…Read More

Category: Bailout Nation, Bailouts, Credit, Derivatives, Regulation

Busted Banks Rebuff Regulation

Front page of the NY Times goes over the shameful behavior of banks — one of the primary causes of the entire crisis — using bailout money to pay lobbyists to maintain the regulatory status quo. Its yet another reason for why they should have been put into bankruptcy once they became insolvent. So far,…Read More

Category: Bailout Nation, Bailouts, Credit, Regulation

Blaming Clinton?

Interesting Sunday Times Magazine article on Bill Clinton. The part I found most intriguing was about the regulatory acts that the Clinton administration was  responsible for: “One thing that thrived during Clinton’s presidency, the economy, has wilted of late. The economic boom of the 1990s created nearly 23 million new jobs during his eight years,…Read More

Category: Bailouts, Politics, Regulation

The Rise of A Financial Stability Regulator

Just as the Great Depression led to the creation of new institutions and financial practices, the Obama administration is on track to impact financial regulations. One of the new concepts involves a financial stability regulator, David Wessel explains.


Category: Regulation, Video

How to Fix the Financial System

Hey, put a BandAid on that, or it might get infected! > The Committee on Capital Markets Regulation has a proposal to fix the financial. I only gave it a quick look through, but what I saw was pretty milquetoast: Here’s the highlights — a list of obvious fixes — via Real Time Economics: -Keep…Read More

Category: Bailouts, Markets, Regulation