Hearings on Clarke Suspended : Riegle Calls Him Weak Bank Regulator, Adjourns Panel Indefinitely

Senate Banking Committee Chairman Donald Riegle (D-Mich.) on Thursday accused Comptroller of the Currency Robert L. Clarke of being a weak regulator and indicated that he will insist on a further lengthy delay in the vote on Clarke’s renomination.

“You’re the one out there with a different standard,” offering excessively easy rules for the valuation of real estate designed to help troubled Texas and West Coast banks, Riegle told Clarke.

Other federal regulators “see it differently and have a better record,” said Riegle, who adjourned the nomination hearings without scheduling further sessions for other senators to ask questions and for a final committee vote. Clarke was questioned for less than an hour.

Clarke insisted that his examiners were “not more lenient” but instead were simply realistic in considering the prospects of properties when evaluating real estate loans.

Asked after the hearing if the Banking Committee will vote on the Clarke nomination this year, Riegle said, “I’m not going to make a judgment on that.”

The comptroller, a soft-spoken Texan, said he had found the hearing “dismaying.”

“I had been prepared to spend the day answering whatever questions anyone wanted to present to me,” Clarke said after the session was adjourned. “I think I should be required to defend my record, but it is somewhat dismaying to have gotten prepared to do that and then not be” allowed to do so, he said.

The agency has “been asked for incredible amounts of material by the committee staff, making it difficult for us to be doing the things I think we should be doing in supervising banks,” he said.

Clarke served as comptroller from 1985 to 1990 and was renominated in December for a second five-year term. His nomination has been on hold since January, while the Banking Committee conducted a major investigation of his policies as well as his personal financial activities.

Riegle believes that Clarke has been too accommodating to bankers in handling real estate loans and will conduct extensive further hearings to develop a public record before the committee votes, sources said Thursday.

Riegle noted during Thursday’s hearing that more national banks have failed during Clarke’s 5 1/2 years as comptroller than during the previous 51-year history of the federal insurance system for bank deposits. The failure of national banks supervised by Clarke cost the insurance fund $15.7 billion, the committee chairman said.

Riegle said Clarke’s policies were “weaker than those of other regulators and caused greater losses to the deposit insurance fund.”

Treasury Secretary Nicholas F. Brady, meanwhile, issued a strong statement of support for Clarke, in what is becoming an increasingly partisan dispute with the Democratic majority on the committee.

“After enduring nine months of delay since the nomination was submitted to Congress, it is distressing the confirmation process was again delayed,” Brady said.

“The Administration again urges the committee to act quickly to confirm Mr. Clarke,” Brady said. “It would be damaging if politics got in the way of objectivity, created uncertainty in the process of confirming the key regulator and sent a muddled message to financial institutions and examiners at a time of tight credit.”

The committee’s senior Republican, Sen. Jake Garn of Utah, warned against making Clarke a scapegoat for the weaknesses of the banking system. “There are too many reasons and too much blame to go around to indicate any one person has been responsible,” he said. “I can’t tell you how many calls I got from bankers telling me Bob Clarke was too tough.”