The Senate Committee on Banking, Housing and Urban Affairs has held a full committee hearing on the nominations of Joseph Otting for Comptroller of the Currency and Randal Quarles for Vice Chairman for Supervision of the Federal Reserve Board. Quarles was nominated to be a member of the Fed for a term expiring Jan. 31, 2032, and to be Vice Chairman for supervision for a four year term. Quarles’ nomination is for the remainder of a 14-year term expiring in 2018, and for an additional 14-year term. The Vice Chairman is responsible for developing policy recommendations regarding supervision and regulation for the Fed. Quarles will also be required to appear before Congress semiannually to report on regulatory efforts.
Committee Chairman Mike Crapo (R-Idaho), stated in the open session, "These two positions are critically important to ensuring a safe, sound, and vibrant financial system and we are fortunate to have two highly qualified individuals to consider for these posts. Mr. Otting brings a particular expertise and understanding of our banking system from a long career in financial services," declared Crapo.
Crapo highlighted Quarles’ "wealth of government and private sector experience dealing with both domestic and international financial markets." After reviewing his leadership positions at various financial institutions, Crapo stated his confidence that Otting "will bring strong leadership to the OCC."
Sen. Sherrod Brown (D-Ohio) questioned whether Quarles was "willfully turning a blind eye to Wall Street abuses" while serving as Treasury’s Undersecretary for Domestic Finance in the years leading up to the 2008 financial crisis. The banks, according to Brown, were not "well capitalized" at that time, and "as a result, taxpayers paid billions to bail those banks out, while Mr. Quarles and his company turned a profit off of the crisis." Brown stated that one-fifth of the banking reform rules remain unfinished and contended that "Instead of finishing the job, Wall Street’s allies in Washington are trying to take us backward, weakening or eliminating important safeguards."
Nominee statements. In his statement, Otting noted his experience in many parts of the banking industry. "My banking experience has allowed me to work for one of the largest banks in the nation, two well respected regional banks, and a community bank. I have touched virtually every segment of the industry including serving consumers, businesses, trust functions, private banking, investment services, legal, human resources, compliance, audit, treasury, financial management, operations and technology. This experience provides a broad base of knowledge that will be helpful and insightful in the role as Comptroller."
If confirmed, Otting pledged to honor the mission of the OCC, to ensure that national banks, federal savings and loans, and foreign operations of international banks operate in a safe and sound manner, provide fair access to financial services, treat customers fairly, and comply with applicable laws and regulations.
In his statement, Quarles pledged to be "strongly committed" to the objectives of the Fed "for promoting a strong economy and the stability of the financial system, and supporting robust job growth in a context of price stability." According to Quarles, a key element of his role will be to maintain "the robust resilience of the system to shocks," while making some changes and refinements.
Questioning. Following President Trump’s June nomination of Otting, several senators voiced their opposition, based on Otting’s previous employment as president and CEO at OneWest Bank (see Banking and Finance Law Daily, June 7, 2017).
At the hearing, Sen. Catherine Cortez Masto (D-Nev) questioned Otting on "predatory behaviors" OneWest engaged in under his leadership, specifically the practice of robo-signing. Cortez Masto asked Otting about a legal agreement he signed, conceding that OneWest engaged in robo-signing. She also noted that the consent order between the Office of Thrift Supervision and OneWest specifically stated "that OneWest bank engaged in unsafe or unsound banking practices relating to mortgage servicing and the initiation and handling of foreclosure proceedings."
‘Not a step forward’. Americans for Financial Reform announced its opposition to the confirmation of Quarles, calling it a "step back into the past, not a step forward toward proper regulation of the financial system." AFR declared that "Congress should not hand the key regulatory role of Vice-Chair of Supervision back to a member of the same group of insiders who failed to take action to stop the financial crisis and then profited personally from its fallout."
Companies: Americans for Financial Reform; One West Bank
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