WASHINGTON — In the stages of grief over the death of the Office of Thrift Supervision, employees may finally be reaching acceptance.

Many OTS officials were first in denial about the agency's take-over by the Office of the Comptroller of the Currency, which soon gave way to anger, frustration and an unexpected level of bitterness about the merger, industry watchers and former employees said.

As the transfer date nears and their fates have become more certain, however, many employees are happy to have jobs and some are even hopeful about new opportunities.

"There is, from what I can see, a feeling of reconciliation," said Kip Weissman, a former OTS attorney who represents thrifts at the law firm Luse, Gorman, Pomerenk & Schick.

It's no secret that the merger was problematic from the beginning. Angst and indignation are normal feelings in any merger, but they seemed acute at the OTS, observers said, in part because the transaction was long-viewed by OTS as a merger of equals.

But soon after the merger process began, it became clear that neither the OCC nor other industry players really viewed it the same way. As the OCC began to take charge of OTS operations, employees have responded differently. About 100 of the thrift agency's employees left, with many retiring or finding jobs in the private sector. Roughly 200 other employees found jobs with other regulators, including the Federal Deposit Insurance Corp., Federal Reserve Board and Consumer Financial Protection Bureau. But a little more than 700 employees remain behind, and are expected to start at the OCC on July 18.

"The uncertainty was really taking its toll," said Lawrence Kaplan, a partner at Paul, Hastings, Janofsky & Walker LLP, and a former OTS employee who still works closely with the agency. "People know they're moving on and they have jobs. They have interesting jobs, they've been meeting with their counterparts, their new colleagues, and people among the lawyers - who I probably deal with more - are very excited."

Current and former employees complained the OCC wasn't providing information quickly enough about how they would be integrated or, in the case of field examiners, whether they may have to relocate. They accused OCC officials of favoring their own employees, and of having an air of superiority.

"There is, at least at headquarters and I've heard in the field as well, a great deal of disappointment about how this has gone, and what OTS views as unfair treatment by the OCC," said one OTS employee, who asked not to be identified for fear of retaliation.

Others said the OCC tried to accommodate them but, as with any merger, they couldn't please everyone.

For example, field examiners who were located in cities without a local OCC office were forced to relocate in most cases. In what they perceived as a snub of the OTS accreditation process, veteran examiners were told they'd have to undergo additional training and certification in their new jobs.

"I think that they really were putting in a good faith effort to make sure that we were all treated as well as we could be, but the end result was not exactly favorable in a lot of cases," said one former examiner, who left his Midwest field office in March to join a consulting firm.

It's not for lack of trying on the OCC's part, officials said.

Starting last November, OCC began holding regular conference calls with OTS officials, allowing employees across the country to dial in and submit questions. They asked employees to fill out extensive questionnaires to try to match them up with most suitable positions.

Jennifer Kelly, the OCC's senior deputy comptroller for midsize and community bank supervision, who will oversee most of the transferring employees, said managers have reminded employees about the need to be especially welcoming to their new co-workers. Kelly said she has "the utmost sympathy" for what OTS employees are going through, and she insisted, the OCC not only wants them - they need them.

"We're inheriting a lot of new work, (and) we desperately need them here to help us get the work done," she said. "So why we would view them as second-class citizens when we're so dependent on their help and want them to come over? It's not true."

But perception is reality, and the perception goes back a long time, observers said.

"Historically, ever since I even entered the government, there was always that tension between OCC and OTS," said Dwight Smith, a partner at Morrison & Foerster and a former OTS employee. "There are good personal relationships at the staff level, but OTS as a whole has often felt like the younger brother to the OCC."

Adding to the bitterness is the feeling within OTS that it was unfairly blamed for the financial crisis. Agency officials were reluctant to admit that they were not being merged into the OCC so much as acquired by it.

"It's an acquisition, not a merger of equals," said Frank Bonaventure, a principle at Ober, Kaler, Grimes & Shriver. "And the OCC is in control of this, so it's going to be the OCC's way."

That was perhaps most evident in the way OCC chose to incorporate OTS managers, one employee said. Although OCC created an extra layer of "deputy comptrollers" to accommodate OTS managers, only one was named a "senior deputy comptroller."

"I think that there could have been a happy medium where the best people were picked for the job, regardless of where they had worked," one employee said. "What we're seeing among the managers is really wholesale demotions and downgrades."

Across the organization, employees are concerned about the long-term impact on their careers and professional prospects, he said. Dodd-Frank only guarantees their employment for three years; if there are future lay-offs, who will go first? Others worried about being moved to lower pay bands - which could affect future raises and retirement - and being required to undergo additional training and certification.

Despite their ongoing concerns, the pain of the merger seems to have abated.

Recently, combined teams of examiners from both OTS and OCC have worked together to conduct pilot exams at thrifts and national banks.

"What we found is, when you put examiners together in a financial institution, they hit the ground running pretty quickly, and there's a lot of common ground there," Kelly said.

On the eve of their transfer, employees also realize it could have been a lot worse.

"There is certainly recognition among our employees that Congress could have just abolished the agency without at least the protection of saying you've got a job," said the anonymous employee. "At least people have a job, and they're certainly cognizant of that and they're thankful for that."

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