The Hatfields and the McCoys. The Greeks and the Spartans. The Federal Reserve Board and the Office of the Comptroller of the Currency.
All longtime rivals.
"The rivalry is felt fairly intensely," said Alan Blinder, the former Fed vice chairman who now teaches at Princeton University. "It is natural. You have two bureaucracies with overlapping turf."
Though the two agencies have competed for decades, consolidation in the industry has intensified their rivalry. Among the recent skirmishes:
*Though Fed officials had been working on a new supervision-by-risk program for months, Comptroller Eugene A. Ludwig beat them to the punch Sept. 26, 1995, identifying nine risks national bank examiners would focus on. Two months later, the central bank came out with its program, but limited the number of risks to six.
*The Comptroller's Office stole the Fed's thunder again by releasing a new market risk proposal Aug. 6 - a day before the Fed's scheduled vote.
*While all the banking agencies were working together on an advisory about managing credit derivatives risk, the OCC broke from the pack and issued its version Aug 12. The Fed scrambled and got its guidelines out later that afternoon.
Right now, the OCC and the Fed are debating how to meet a congressional mandate without ceding any power. Trying to simplify banking regulation, Congress in 1994 gave the four banking agencies two years to decide how to designate a lead regulator for each bank.
A decision was due Sept. 23, but the regulators have still not reported to Congress because the OCC and the Fed can't agree on a plan.
Officials at both agencies publicly deny the existence of a struggle. "I don't think of it as a rivalry," said Fed Governor Susan M. Phillips, who heads the central bank's committee on supervisory and regulatory affairs. "We each have our own responsibilities." In fact, she said the agencies are cooperating more today than ever to produce coordinated policies.
"We have very collegial and positive relations with our fellow agencies," Mr. Ludwig said. "We have made a huge amount of progress in coordinating our efforts and trying to reduce burden."
But when they are not being quoted by name, most officials acknowledge they follow very closely what their colleagues are doing.
"It's like a chess game," said a senior regulator at another agency. "One agency moves and the other counters."
"In the past two years, there has definitely been more of a stream of questions like 'What is the Fed doing on this?'" an OCC employee said.
Frustrating the OCC, the Fed often winds up in the spotlight even when the comptroller does his best to preempt the central bank. That's because the Fed approves actions at public meetings while OCC rules are finalized away from the spotlight when Mr. Ludwig signs a piece of paper.
Consequently, press accounts of the market risk rules referred extensively to the Fed, even though the OCC adopted its version first.
As the banking industry contracts, the OCC and the Fed are competing for fewer customers.
Merging banks have been deluged by the agencies hawking their charter as the best. Last year, when Chase Manhattan Corp. and Chemical Banking Corp. combined, "there was some very intense lobbying by senior level people from both of the agencies, and some very intense analyses of why it's better to be with the Fed or the OCC," said one observer.
The Federal Reserve Bank of New York eventually persuaded the merging banks that a state charter was the way to go because the Fed doesn't charge fees.
So far, the agencies are tied in the race to win over newly merged megabanks. Besides the Chase/Chemical merger, First Chicago Corp. decided to take a state charter when it acquired NBD Corp. Yet other big players have held onto national charters, including Wells Fargo & Co. and Fleet Financial Group.
To woo banks, the Fed and the Comptroller's Office have been polishing their charters, adding new powers and slashing burdensome paperwork requirements.
The Fed has long touted the fact that it doesn't charge for exams. So the OCC, dependent on examination revenue to survive, reduced its staff in 1994 to cut fees. It also plans to implement risk-based pricing, so the best-managed banks will pay even less.
The OCC also has gone to the Supreme Court twice in the past 24 months to secure national banks' right to sell annuities and insurance. The comptroller also proposed allowing banks to underwrite securities directly through subsidiaries, eliminating the need for holding companies.
The Fed countered this summer with a radical overhaul of Regulation Y that would expand the data processing services holding companies can offer, eliminate the tying restriction on nonbank affiliates, and halve the processing time for merger applications. It also proposed to more than double the amount of underwriting bank holding company affiliates may perform.
Tension between the two agencies is not new. Comptroller John Skelton Williams refused in 1915 to provide the newly created Fed with examination reports until Congress intervened. In the early 1930s, the OCC nearly succeeded in eliminating the Fed's examination authority altogether.
But the Fed also has been the aggressor in skirmishes with the Comptroller's Office. Fed Chairman Marriner Eccles tried to take over the OCC in 1938, proposing that Congress make the comptroller a member of the board of governors. He also successfully fought to give the Fed - rather than the OCC - control over bank holding company affiliates.
In the 1970s, battles flared up again, but they didn't involve the blatant power grabs of the past. Senate Banking Committee Chairman William Proxmire accused the Fed and the OCC of engaging in a "competition in laxity." Then-Fed Chairman Arthur Burns preferred to call it a "competition in excellence."
(A high-ranking regulator quipped: "Twenty-five years later, we're still wondering which it is.")
But in the past year, the rivalry has been particularly fierce. L. William Seidman, the former FDIC chairman, blames the tension on House Banking Committee Chairman Jim Leach. The Iowa Republican makes no bones about his belief that the Fed is the premier banking regulator, and he has repeatedly attacked the comptroller's efforts to expand the national bank charter.
"It has been intensified by Rep. Leach creating a battle out of this by representing the Fed and going after the comptroller," Mr. Seidman said. "The comptroller has had to respond, which has given this visibility that we haven't seen before."
Regardless of which agency comes out ahead, observers say bankers are the big winners. "It has become a competition ... that has been nothing but good for the banking industry," said Karen Shaw Petrou, president of ISD/Shaw Inc. "It has inspired a lot of creativity at the agencies."
