Regulator Hands Off Ruling on Bank’s Bid

A federal regulator who attended one of the White House coffee klatches that are a key part of the Democratic fund-raising furor removed himself Thursday from deciding a case involving a bank represented at the gathering.

Citing concerns that his objectivity could be questioned, Comptroller of the Currency Eugene A. Ludwig said that he was assigning an aide to decide two applications by NationsBank Corp. of Charlotte, N.C., to enter the real estate leasing and real estate development businesses.

Last May, Ludwig attended a White House coffee sponsored by the Democratic National Committee that also was attended by Hugh L. McColl Jr., chief executive of NationsBank, and more than a dozen executives from other banks.

Reports of the gathering surfaced in January as part of revelations that guests at this and similar coffees during 1995 and 1996 donated a total of $27 million to the Democratic Party, prompting criticism that access to the White House was “for sale.”

Ludwig, a longtime friend of President Clinton, said in January that he would not have attended the event had he known it was sponsored by the Democrats. He said his presence at a gathering of executives from an industry he regulates was “inappropriate” and he regretted it.

Aides said Thursday that Ludwig’s recusal from the NationsBank case does not foreshadow similar action in other matters. But others wondered about his ability to deal with future cases involving other bankers at the coffee.

“Will this guy ever be able to regulate again?” asked one GOP congressional critic, who asked not to be identified by name.

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Lee Cross, Ludwig’s spokeswoman, said that the NationsBank case was unusual because it represented a bank entering a new line of business and thus was outside Ludwig’s usual supervisory duties over 2,800 national banks. Still, Cross did not rule out the prospect that a similar situation would cause Ludwig to remove himself from a future regulatory decision.

Cross said Ludwig’s recusal resulted from “the notoriety” of the fund-raising event combined with the significant attention that has surrounded NationsBank applications for the new business ventures.

“Nobody should make the assumption” that Ludwig will excuse himself from ruling on applications by other banks represented at the White House coffee, she said.

“We don’t have any applications from other banks [in the group],” she added. “We don’t know what those applications might involve, and we will look at it on a case-by-case basis.”

Ludwig has been encouraging banks in his jurisdiction to expand into new lines of business. In what amounted to the first applications, NationsBank is seeking permission to create an operating subsidiary to go into real estate development, to build housing on land owned by the bank and to begin real estate leasing operations.

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Other executives who attended the White House coffee were from such large banks as BankAmerica Corp., Wells Fargo Bank, Chase Manhattan, Wachovia Corp., Bankers Trust Company and Barnett Banks.

In a memo explaining his recusal from the NationsBank case, Ludwig said: “There must be absolutely no question about the impartiality and fairness of the decisions on these [NationsBank] applications.”

Rep. Spencer Bachus (R-Ala.), who heads the House Banking and Financial Services general oversight and investigations subcommittee, said that Ludwig “has exercised good judgment in this instance, in light of the questions surrounding the fund-raising coffee.”