Time to Speak Out Against the OCC's Planned Heavy Hand

The Comptroller of the Currency, John Dugan is a banking attorney who’s never run a bank and who has scant experience as a regulator. He’s recently expressed concern about potential deterioration in the credit quality of commercial real estate loans. As a result of his concern, Dugan has promised more scrutiny, more criticized assets, more reserve increases--and more problem banks.

Based on Dugan’s promises, I have some concerns about the OCC.

If Dugan does what he says he’s going to do, the OCC is about to embark on the same regulatory approach that had the effect of accelerating the real estate lending problems the banking industry endured in the 1990’s. Loans that are performing well will be deemed non-performing by effective regulatory fiat, and the lender will pay. Credit costs will soar, capital ratios will be impaired, and bank earnings will plummet—all for no good reason.

All this will be brought about, by the way, by the same guy who, as a Deputy Assistant Treasury Secretary in the early 1990s, helped bring Citibank to the brink during the last crisis.

It’s time for bankers to speak out. Yes, we all know the credit environment has gotten tougher, and that credit standards must improve. Lenders need to be paid adequately for risk. It’s a time for prudent caution. The last thing the industry needs, though, is a massive overreaction imposed by panicked regulators. Based on my read of Dugan’s intentions, though, that’s exactly what’s going to happen.

The banking industry can’t stand around and again allow the OCC to turn a problem into a crisis. Bankers, you need to speak out. You need to fight back.

We’ll help. Send us your stories of regulatory overreaction and abuse. We’ll share them here (protecting your identity, of course). The more of your stories that come to light, the more likely it is that the OCC can be reined and prevented from causing chaos within the industry. So email me now! We’ll be your voice!