WASHINGTON - House Banking Committee Chairman Jim Leach blasted the comptroller of the currency on Thursday, accusing him of intimidating bank presidents in an effort to maintain regulatory turf.
"It has come to my attention that in recent weeks as comptroller you have been personally intimidating presidents of national banks and forcefully suggesting that they ... support the OCC perspective on Glass- Steagall reform," Rep. Leach said in a six-page letter to Comptroller Eugene A. Ludwig.
The Iowa Republican said Mr. Ludwig's activities are "unseemly" and added, "The inherent possibility of coercion in such actions is self- evident."
Mr. Ludwig was traveling Thursday and could not be reached for comment. But agency spokeswoman Leonora Cross called Rep. Leach's accusations "absolutely false."
"Gene sure hasn't been personally intimidating bankers, and he hasn't been lobbying," she said. "That's illegal. Gene's an attorney, and he knows that."
Rep. Leach was angry with Mr. Ludwig and Treasury Under Secretary John D. Hawke Jr. for criticizing a provision in the Glass-Steagall repeal package that would bar new insurance powers for national banks.
The national bank regulator, Rep. Leach said, was more concerned about turf than about sound public policy. Under the House bill, the Federal Reserve would regulate a new class of wholesale financial institutions.
"This disingenuous criticism is plainly rooted in turf consideration - i.e. that the Fed, rather than the OCC, has been designated the appropriate regulator - at the expense of serious policy concerns," Rep. Leach wrote.
In a speech delivered Wednesday to the Association of Banks in Insurance, Mr. Ludwig urged banks to oppose the Glass-Steagall and regulatory relief bill if the moratorium on new insurance powers is included. (Excerpts from Mr. Ludwig's speech appear on page 3.)
"No amount of cost cutting can ever make the banking industry competitive if it cannot offer the products its customers demand," Mr. Ludwig said. Moreover, he said the House version of Glass-Steagall reform does little to help banks.
Rep. Leach took sharp exception to a number of Mr. Ludwig's points. In particular, he took issue with Mr. Ludwig's warning that the proposed five- year moratorium on insurance powers might be extended indefinitely.
A 1987 short-term moratorium on new insurance, real estate, and securities powers for banks was allowed to expire on schedule, without any effort to renew it, he said.
Rep. Leach also argued that the regulatory relief legislation being packaged with the Glass-Steagall bill includes a number of provisions that are of pressing importance to the banking industry. Mr. Ludwig was wrong to argue that their benefits were negated by the insurance moratorium, he said.
The lawmaker also charged that the comptroller was motivated by a desire to maintain a constituency of national banks by offering favorable regulatory policies - a process Rep. Leach referred to as "regulatory arbitrage."
"The last thing the financial community needs is a national bank regulator attempting to attract business for itself based on lax regulation or an expansive construction of the law," he said.