In five years as comptroller of the currency, John Dugan did not draw the limelight shined on other regulators.
But as he gets ready to depart, there is no shortage of opinions on his legacy. To some, he was the classic behind-the-scenes operator, imposing his will quietly. Others say that as a crisis regulator he was too quiet, and quick to defend banks more than others.
Dugan counters that he was out in front on the issues most relevant to his agency, even if that set him apart from other regulators.
"Different agencies have different challenges which require different kinds of responses. As an exclusive supervisory-focused regulator on the commercial banks, we provided the kind of vocal leadership that we should have," he said in an interview. "I don't think of us as having been shrinking violets."
A former banking attorney, Dugan will leave the Office of the Comptroller of the Currency Aug. 14 after a five-year term.
During that time, Dugan said, the OCC was an effective crisis manager, worked to soften the impact of financial turmoil on national banks and sounded off on certain regulatory issues relevant to those banks, such as the need for better loan underwriting and the risk of being too reliant on commercial real estate lending.
"On the places where giving a speech would have helped, I think we spoke our minds on those as we should have," he said. "We were right up front on nontraditional mortgages, and a lot on the [2006] commercial real estate guidance. … There have been a bunch of places where we were very outspoken, so I don't think that was an issue."
But for many, Dugan's mark in the face of unprecedented upheaval was not strong enough for a regulator in such an important post, especially when compared to higher-profile counterparts such as Federal Reserve Board Chairman Ben Bernanke and Federal Deposit Insurance Corp. Chairman Sheila Bair.
"He's been relatively silent throughout the whole process," said James Barth, the Lowder Eminent Scholar in Finance at Auburn University and a senior fellow at the Milken Institute. "I don't think he was on vacation throughout the crisis. But publicly I don't know exactly what he thought on most of the issues."
His defenders say Dugan did not need to be flashy to be important. They say he had considerable influence over national banks, while also having an impact in the debate over regulatory reform. The final legislation restricts preemption, but not as severely as originally proposed, and observers say he deserves credit for that.
"If you mean he wasn't making statements … that may be true," said John Hawke Jr., a former comptroller and now a partner at Arnold & Porter. "He was certainly visible to the industry that he was regulating."
Eugene Ludwig, another former comptroller and now the head of Promontory Financial Group, agreed. "I don't think visibility is the issue," Ludwig said. "The question is: What did you accomplish? John Dugan preserved the independence of the" OCC, "when all agencies were under scrutiny, and he maintained a steady hand at all times."
Dugan said the OCC took charge on singular crises for which it simply has not gotten credit. For example, he said, he was heavily involved in the decision to provide Troubled Asset Relief Program funds to PNC Financial Services Group Inc., which in turn used the capital to buy the faltering National City Corp. While the policymakers were criticized for not doing more to keep Nat City as a locally run institution, Dugan said "if you knew what the alternatives were, this was by far the best outcome possible."
"We would have had to resolve the company and haircut creditors and the crisis would have been far worse," he said. "I don't like to be compared to others. The place where I think we played a significant role is in the trenches of providing supervisory information and dealing with institutions as they got into trouble.""
But the experience of national banks during the crisis is a key area in which his performance — as that of his agency — sparks debate. Dugan said the agency does not get enough credit for helping to keep losses to the Deposit Insurance Fund stemming from national bank failures low relative to other types of institutions. (Since the start of 2008, 45 national banks have failed.)
"We have quite a good record dealing cooperatively with the FDIC and if you look at the number of the institutions that have failed and how many of them that have been national banks compared to the total number of institutions, or the total asset size of the institution or the losses as a percentage of assets of those institutions that did fail, we came out pretty well," he said.
Yet critics point out that those losses would have been much higher if the largest national bank subsidiaries — including those of Bank of America Corp. and Citigroup Inc. — had not received lifeboats through the unprecedented aid packages granted by Tarp.
"The only reason they are still open today is because of hundreds of billions of taxpayer funds thrown in to keep them open," said Camden Fine, the president and chief executive officer of the Independent Community Bankers of America.
Dugan says those banking subsidiaries are not to blame for the poor underwriting in mortgages that helped produce billions in losses for large firms through their securities arms. He says he has been a consistent advocate for stronger underwriting.
"Some of our big national banking organizations … thought they weren't taking subprime risk, only to find out that their securities arm had structured these securities with loans from third party subprime loans that were much lower quality that ended up causing big problems," he said.
But others said national banks and their regulator are not immune from the blame.
"The OCC bears a large part of responsibility for the subprime fiasco because not only were large banks involved in the purchase and securitization of subprime, they were also involved in the derivatives and CDOs," said Chris Whalen, managing director at Lord, Whalen LLC's Institutional Risk Analytics.
