Eugene A. Ludwig's recusal from two controversial NationsBank applications could limit his authority as comptroller of the currency, industry lawyers warned Thursday.
In an April 3 memo citing his recent political problems, Mr. Ludwig said he would not rule on NationsBank's request this week to enter the real estate development and lease financing businesses.
The agency's chief counsel, Julie L. Williams, will handle the applications.
"There must be absolutely no question about the impartiality and fairness of the decisions on these applications," Mr. Ludwig wrote in the memo to Ms. Williams.
NationsBank chief executive Hugh L. McColl Jr. was one of 17 bankers who attended a May 13 coffee with President Clinton and Mr. Ludwig.
Since January, when he learned the coffee was organized by the Democratic National Committee, Mr. Ludwig has been acutely aware of appearances.
The recusal had lawyers asking whether Mr. Ludwig will refuse to rule on applications filed by any of the 17 banks.
The group includes some of the nation's largest, such as BankAmerica Corp., Banc One Corp., and Fleet Financial Group.
"I can't see how Ludwig can just stop with Hugh McColl," said a prominent banking lawyer. "He would have to do the same for the other bankers."
"Does this mean that the comptroller will recuse himself anytime these banks send in a creative or sensitive application?" said Brian W. Smith, a former OCC chief counsel who is now a partner with the Washington law firm Mayer, Brown & Platt.
OCC spokeswoman Leonora S. Cross downplayed the possibility, saying Mr. Ludwig routinely delegates decision-making authority on applications to Ms. Williams.
"Would he recuse himself again? I don't know. We'd have to look at the application and make a decision at that time," Ms. Cross said.
Regardless, observers expect the OCC to grant NationsBank's request. Controversial applications such as NationsBank's generally are worked out with the agency's staff long before they are filed.
In fact, former Comptroller Robert L. Clarke noted Thursday that banks do not request new powers from the agency without extensive preliminary discussions.
"The idea is to try to find out if there are any showstoppers that should cause you to not file the application in the first place," said Mr. Clarke, now a partner with the Houston law firm Bracewell & Patterson.
"When I was at the OCC, we would say, 'Based on what you've told us, we don't see any problems with this application, so go ahead and file it.' "
The applications filed by the lead bank of Charlotte, N.C.-based NationsBank Corp. are the first under the agency's controversial operating- subsidiary, or "op-sub" rule, which opened the door for national bank subsidiaries to enter new businesses.
Mr. Ludwig decided to recuse himself from the NationsBank applications late Wednesday when the agency learned, through a newspaper reporter, that lawmakers were concerned about the comptroller's involvement.
"There were questions raised about potential problems from an appearance standpoint," Ms. Cross said.
"He did this because these were the first applications of this kind, and they have attracted a lot of attention."
Indeed, Senate Banking Committee Chairman Alfonse M. D'Amato said approving the applications would "threaten the American taxpayer."
