April Fools came a day early* with the weirdest financial-reform story of recent memory: The Office of the Comptroller of Currency has suddenly stepped out to support the Consumer Financial Protection Bureau. My friend Shahien Nasiripour reports:
The regulator, the Office of the Comptroller of the Currency, now supports an independent consumer agency -- finding itself on the opposite side of the issue from an industry it polices and powerful lawmakers it answers to, who are firmly committed to killing the proposed agency.
... In an interview, [deputy comptroller for public affairs Robert M. Garsson] acknowledged that the OCC had placed roadblocks in the path of the proposed consumer agency before evolving its position. One argument that was used by the OCC, the bank lobby and its friends in Congress to stir up opposition to the proposal was that the banking industry's safety and soundness, or its profitability, would inevitably clash with the consumer agency's mandate to protect borrowers, leading to situations where the consumer agency's views "would always prevail," ultimately hurting the bottom lines of the nation's roughly 8,000 banks and thereby drying up credit.
Many observers got whiplash yesterday doing dramatic spit-takes when they heard the news. The OCC is headed by Comptroller of Currency John Dugan, who is perhaps the most industry sympathetic regulator ever -- I suggested firing him earlier this year. The OCC under Dugan has a record as a lax supervisor, becoming the central example of regulatory arbitrage as large banks sought shelter under its umbrella to escape state and other regulation. It wasn't all too surprising that the organization and its leader would seek to stop a new agency that protects consumers.
There are a few possible reasons for the change; one is that the OCC is confident that the veto power other regulators will have over consumer protection will prevent the new office from doing anything drastic. Another is that word came down from the administration that supporting the CFPB is not optional. Or perhaps the OCC believes a bill will pass and doesn't see this as a fight worth having.
Less confusing than the OCC's change of position is the fact that there is no real conflict between consumer-protection and safety-and-soundness regulation, so whether or not the OCC is being sincere in its support, the facts are now on its side. That must be nice.
-- Tim Fernholz
*I mention this date early, as a service announcement, because if you are anything like me you're going to fall for a lot of pranks before you figure that out.
