Comptroller ‘in Real Trouble,’ Senators Say

Foot-dragging by the comptroller of the currency in overseeing explosive and risky growth at the Bank of New England, the third-largest bank failure, may put the regulator’s bid for a second term in jeopardy, senators warned Thursday.

“The comptroller of the currency is in real trouble right now, and whether he can survive, I don’t know,” said Sen. Richard Shelby (D-Ala.).

Disturbed by the rising tide of bank failures, at their highest level since the Great Depression, the Senate Banking Committee has delayed a confirmation hearing for Robert L. Clarke for 10 months.

Members used a hearing Thursday on the Bank of New England failure to lambaste the Office of the Comptroller of the Currency, which Clarke has headed since 1985.

Sen. John Kerry (D-Mass.) ridiculed Clarke for adopting the tough-man nomenclature of the Regulator from Hell.

“There is just a sad record here of the Regulator from Hell not knowing where the hell hell is,” Kerry said.

The one Republican lawmaker at the hearing joined the criticism.

“It seems to me that he who is now called the Regulator from Hell was the regulator from heaven from the Bank of New England’s perspective, but certainly not from the taxpayers’,” said Sen. Alfonse D’Amato (R-N.Y.).

In a report released earlier this week, the General Accounting Office said the OCC ignored mounting evidence of severe problems at the Bank of New England.

The OCC stood by while the bank ballooned into a $32-billion operation by 1989 from a $7.5-billion company four years earlier. Its commercial loans grew dramatically to 28% of its loan portfolio from 17%, and its bad loans about tripled, the GAO said.

Even though junior regulators picked up evidence of problems as early as 1987, the OCC took no steps to shore up the bank until 1989, and then it was too late, the GAO said. It was sold to Fleet/Norstar Inc. last January.

At the hearing Thursday, General Accounting Office chief Charles A. Bowsher said the comptroller’s lax oversight of Bank of New England was symptomatic of widespread regulatory shortcomings at other banks and by all federal bank regulators.

But the committee chairman, Sen. Donald Riegle (D-Mich.), cited a report showing that failures at OCC-regulated banks account for 73% of net losses to the deposit insurance fund.

Despite that, Clarke reversed a 125-year policy and reduced annual on-site examinations, especially at small banks, even though they cause the largest share of losses, he said.

Clarke, 49, is scheduled to begin his confirmation hearings next Thursday.

A Republican Senate aide said he expects rough sledding at the confirmation hearing. But Clarke is adept in such situations and may win.

No senator said he has decided yet to vote against Clarke. But Sen. Christopher Dodd (D-Conn.) said: “This is not a ‘gimme’ by any stretch of the imagination.”