Two weeks ago, 44-year-old Keith Noreika was just another corporate lawyer, advising bank clients on evading regulatory enforcement. Today he runs the Office of the Comptroller of the Currency (OCC), the second-most important banking regulator in the federal government. And nobody seems to know how long Noreika will hold this power, how much authority he will wield, or whether he will use the office to assist the very large banks for which he previously worked. You’ve heard of the fox guarding the henhouse; this is the case of a hen, plucked out of line and made the lead watchman.
OCC needed a leader after Obama-appointed comptroller Thomas Curry’s five-year term expired in April. Rather than make a career staffer acting comptroller until the Senate confirmed a replacement—the common practice for federal agencies—Trump’s Treasury Department (OCC sits within Treasury) hired Noreika off the street as a “first deputy comptroller,” and slid him into the top slot when Curry stepped down May 5.
According to Bloomberg, the unusual maneuver was Noreika’s idea, which he first floated as a volunteer on the Treasury Department’s “landing team” during the Trump transition. His temporary appointment not only enables a Trump loyalist to direct OCC without Senate confirmation, but it sidesteps the traditional ethics process. OCC classifies Noreika as a “special government employee,” retained to perform “temporary duties” for not more than 130 days. This designation typically is given to people serving on advisory committees, not running a federal agency.
Special government employees are exempt from the gift and payment statutes prohibiting outside sources of income or restricting outside employment. They carry lower burdens for conflicts of interest. And perhaps of primary importance to Noreika, they don’t have to sign the Trump ethics pledge, which prohibits executive branch officials from working on matters involving their former clients for two years; communicating with colleagues about their activities for one year after they’ve left the government; lobbying the agencies where they served for five years; or lobbying on behalf of a foreign government forever.
It’s unclear even what a “first deputy” is, legally speaking. A letter from six Democratic senators makes clear they don’t even seem to know whether Noreika works as an OCC employee or a counselor to the Treasury Department. They question whether Noreika can sign enforcement orders, approve mergers, close down national banks, or sit on the Financial Stability Oversight Council, the systemic risk regulator. (For the record, Noreika attended an FSOC meeting last week.)
“You have chosen to replace the current head with an acting head who is unvetted, has obvious conflicts of interest, and lacks the experience to run an agency that employs almost 4,000 individuals and oversees over 2,000 national banks,” wrote the Senate Democrats, led by Chris Van Hollen of Maryland.
For his part, Noreika has jumped into the fray. In his first speech at OCC last week, he said that “now is a good time” to revisit rules implemented under the Dodd-Frank financial reform, to make sure they don’t choke off investment. “We should seek opportunities to eliminate burdens that do not make sense,” he told OCC staff. While literally wearing a “Make America Great Again” cap, Noreika told The Wall Street Journal that he would push his agency to reinterpret the Volcker rule, intended to stop banks from using deposits for risky trading. Such a regulatory gift to Wall Street “could be done even by our agency unilaterally if we had to,” Noreika said. And since OCC has a one-man directorship rather than a five-member panel, the decision for embarking on that deregulatory path is Noreika’s alone.
It’s not surprising Noreika would see himself as an activist and not a caretaker comptroller. He spent most of his career at Covington & Burling, a law firm notorious for its defense of Wall Street, specializing in employing the doctrine of “preemption”—fighting state or local consumer-protection laws by arguing that federally chartered banks cannot be subject to them. Noreika regularly got his clients off, preventing cities and states from applying tougher statutes or suing banks for fraud.
At OCC, one of Noreika’s primary functions will now be reviewing state consumer finance laws and determining whether they ought to be preempted, exactly what he argued for years in court. Under Bush-era Comptroller John Dugan, a Covington & Burling mentor to Noreika, OCC preempted several state predatory lending laws, most notably in Georgia, enabling subprime mortgage originations whose failure fueled the financial crisis and Great Recession.
In his spare time, Noreika did pro bono work arguing against affirmative action in the celebrated University of Michigan case, and attempting to weaken the Voting Rights Act. He’s a full-service right-winger.
Noreika claims to have left his current law firm, Simpson Thacher & Bartlett, and divested any assets that would conflict with his new role. He vowed to “abide by all ethical rules and guidelines and recuse myself wherever appropriate,” in a statement to Bloomberg. As Noreika has advised Wells Fargo, JPMorgan Chase, Bank of America, TD Ameritrade, and US Bancorp, that doesn’t leave much for him to do. But his temporary status means he faces no legal liability if he fails to honor these claims of ethical probity.
Noreika’s role at OCC and what he may do thereafter is so confounding, it’s hard to know what to be worried about. While the 130-day rule would seem to limit his tenure as comptroller, there’s nothing stopping the Trump administration from keeping Noreika in place as a non-confirmed political appointee. Dugan’s replacement, John Walsh, was acting comptroller for nearly three years during President Obama’s first term.
The Trump administration is “realizing that government by non-confirmed people has a lot of advantages,” says Jeff Hauser of the Revolving Door Project, a watchdog group. “People loyal to them can’t survive vetting.” In this sense, Noreika’s installation at OCC could be a dry run for sticking non-confirmed partisans in other key positions, like the Census Bureau (which has an open director seat) or the IRS (whose commissioner’s term ends in November).
If Noreika is just a placeholder until a comptroller is confirmed, that could be even worse. By going in as a special government employee, there’s nothing stopping him from returning to Big Law in four months, after gleaning inside knowledge about how bank examiners operate. Far from losing income from years of government service, this temporary gig would be a huge résumé-builder for Noreika, who could command mind-boggling fees with an OCC directorship under his belt. In fact, the information he could gain about government operations would be invaluable.
“How many reports could you order up so you understand the strengths and weaknesses of bank supervision, what they see and what they miss?” Hauser asks. “You can weaponize that information in 130 days and pop out to the private sector.” Indeed, the Noreika experiment could create an entirely new class of revolving-door types who spin short-term government service into big money as a kind of insider informant for corporate America. Just his appointment undermines the spirit of the ethics pledge, and makes a virtue of a government pit stop to gain political intelligence.
In other words, it may not be the conflicts while in office we have to worry about with Noreika, but the conflicts that would pop up after he leaves. Anyone running OCC under Trump will want to blow up financial regulations and protect the banks. But temps like Noreika can do all that and then return a conquering hero to the waiting arms of Wall Street.