Californian Is Bush’s Pick for Key Bank Post : Regulation: James E. Gilleran is likely to be nominated as comptroller of the currency.

James E. Gilleran, California’s superintendent of banks since 1989, has emerged as the Bush Administration’s leading candidate for comptroller of the currency, government and industry sources said Thursday.

Gilleran would be a popular choice among California bankers, who may need a sympathetic ear among federal regulators if the state’s real estate market continues to weaken. For the same reason, however, he could have a hard time winning approval from the Senate Banking Committee and confirmation from the full Senate.

The White House has formally referred Gilleran’s name to the FBI for a background check, an expensive and lengthy process. If the FBI report is positive, he is expected to be nominated for a five-year term.

The comptroller supervises the nation’s largest banks. The post has been vacant since the Senate Banking Committee last year rejected the nomination of Robert Clarke for a second term.

Gilleran spoke with members of his staff Thursday after news of his likely nomination appeared in the Wall Street Journal. He could not be reached for comment Thursday, but others who spoke with him said he indicated that discussion of the nomination is premature.

A certified public accountant, Gilleran, 59, has a reputation among bankers as a competent regulator. Most of the nine bank failures during his tenure have been small ones suffering from a wide range of problems, not just real estate.

The largest occurred in January with the failure of Independence Bank, an Encino institution that had been secretly controlled by the scandal-plagued Bank of Credit & Commerce International. Gilleran closed Independence after a regulatory examination showed extensive real estate loan problems.

His nomination by the Bush Administration could spark another confrontation in an election year.

Last year, Sen. Donald Riegle (D-Mich.), chairman of the Banking Committee, accused Clarke of laxity in his agency’s oversight of lending practices at troubled banks in Texas and New England. Riegle, who held extensive hearings on the Clarke nomination, has been emphasizing the dangers of regulators being too soft in their judgments. Bush Administration officials, in sharp contrast, have said that they worry that overly zealous examiners are making bankers fearful of continuing old loans and generating new ones.

“One of the most important tasks facing the comptroller would be to take a hard look at the condition of California’s banks because of the problems in real estate,” a regulatory source said.

This concern, involving conflicting views of regulation between Congress and the White House, could produce a stalemate if Gilleran’s name is sent to the Senate. The last time the comptroller’s job was vacant during an election year, 1976, the Republican Ford Administration sent a nominee’s name to the Senate, but the Democrat-dominated Banking Committee refused to act on it.

The Democrats may decide to wait again this year, hoping that they can recapture the White House so they can decide who will have the job of regulating the nation’s 3,900 federally chartered banks.

Rosenblatt reported from Washington and Bates from Los Angeles.