Why Is John Dugan Being Rewarded for Failure?

Even as the Obama administration lambastes Wall Street for rewarding failure by paying big bonuses to the people who helped wreck the economy, it’s providing its own reward for a similar failure, much closer to home.

And it’s a doozy. Bloomberg News reports the administration wants to retain John Dugan as Comptroller of the Currency for the remainder of his term. Yes, that John Dugan: the same regulator who presided over the proliferation of unsound lending practices earlier this decade that have since helped bring the financial system to its knees.

The OCC, of course, is a lead regulator of the banking industry. It is charged with upholding the safety and soundness of most of the major banks in the country. The very same banks, that is to say, that have lately required a massive government bailout.

So, by all means, let’s have the comptroller stay on. It would be tough to find someone with his record, which includes:

• Permitting Citigroup (C), then the country’s biggest bank, to hurtle full-bore into the subprime lending business, a decision that has brought the company to the brink of failure;
• Approving Wachovia’s act of corporate suicide, its acquisition of Golden West Financial;
• Allowing the country’s tenth largest bank, National City, to expand so heavily into subprime that it recently had to be sold in a government-assisted fire sale.

It is an astonishing list of accomplishments. Fortunes have evaporated, even as the federal government spends staggering sums to prop up what’s left of the banking system. Meanwhile, the list of institutions that were allowed to blow themselves up on Dugan’s watch gets longer every week.

As it happens, the CEOs of every institution listed above, and many more, have lost their jobs as a result of the misjudgments they made earlier this decade. That’s as it should be. On Wall Street, as President Obama says, pay should be for performance.

Only in upside down logic of Washington does it follow that failure is rewarded.

Comments

[surferdude808:]

it seems the ots is the only agency getting kicked. the occ (self-proclaimed as a "world class regulator") is/was the primary supervisory for institutions on a far larger scale than ots. both C and BAC have received open-bank assistance (they need to be counted as failures in the fdic numbers, but that is another subject); and WB was going to fail if not for the manipulated merger with WFC. these failures far exceed WM, IMB and DSL. how about the FRB, which supervises these bank holding companies and now they will be rewarded as the "systemic risk" regulator in the upcoming reform proposed by representative frank. but let's not forget the fdic as they sat back and did nothing while unprecented exposures to risky assets (c&d, cre, etc.) were put on the balance sheet. all of the regulators need to be called on the carpet and held accountable for their failings.

Feb 04 10:28 AM

[monday1929:]

If Geithner, whose failue to safeguard the banking system as head NY Fed Chief gets a free pass and promotion, then why not Dugan, who at least probably pays his Taxes.

Feb 04 01:35 PM