The comptroller of the currency is aggrandizing his agency and undermining state authorities by granting national banks new powers, Senate Banking Committee Chairman Alfonse M. D'Amato charged Thursday.
Comptroller Eugene A. Ludwig "has displayed a clear disregard for the limits of his authority, for other state and federal regulators, and for the Congress," the New York Republican said at an oversight hearing. "We've got the czar of czars here."
Sen. D'Amato vowed to introduce legislation to prevent the OCC from usurping more power from securities and insurance regulators.
Details about the measure were unavailable Thursday, but Sen. D'Amato said the bill would ensure that "the Securities and Exchange Commission regulates securities activities, bank regulators will regulate bank products and services, and state insurance regulators will regulate insurance."
The hearing marked the first time Mr. Ludwig has been called before Senate Banking's financial institutions subcommittee for an oversight hearing. Subcommittee Chairman Lauch Faircloth, R-N.C., wanted to question Mr. Ludwig about the OCC's so-called operating subsidiary rule, which allows national bank units to engage in activities banned from the parent bank.
Compared to Sen. D'Amato, Sen. Faircloth was surprisingly complimentary of the comptroller, noting that the OCC was compelled to issue the op-sub rule because Congress has failed to pass comprehensive financial modernization legislation.
"This has created a vacuum for the regulators," Sen. Faircloth said. "Commercial banks have every right to be an integral part of the financial services system."
For his part, Mr. Ludwig said the continued health of the national banking system depends upon new powers. "Not to allow this evolution to continue would be unwise, unsafe, and unsound," Mr. Ludwig said.
But Sen. D'Amato accused the OCC of deliberately sinking financial reform by giving banks unprecedented access to the insurance and securities markets.
"Some of the larger money-center banks have said, 'We don't need anything, we have the comptroller,' " Sen. D'Amato said. "But their competitors do not ... have the ability to get into the banking industry."
During a particularly heated exchange, Sen. D'Amato accused the comptroller of an "unprecedented, aggressive marketing effort to convince state banks to flip to a national charter."
Mr. Ludwig denied the allegation. "I strongly disagree with the implications of that statement," he said. "I am very cautious to instruct our people not to go out soliciting."
Sen. D'Amato held up a document prepared by the OCC's central district describing recent agency decisions that have enhanced the national bank charter. The lawmaker said it was a "pretty comprehensive marketing tool" that the OCC has used to convince state banks to switch charters.
However, an agency spokeswoman said in an interview after the hearing that the document was never shown to state bank executives. Rather it was presented exclusively to national banks at an Iowa Bankers Association meeting last November, she said.
This is the second time this year Sen. D'Amato has accused banking regulators of overstepping their authority. At a March 20 hearing, the lawmaker blasted the Federal Reserve Board for expanding bank securities powers.